Commission Rate: 15% or 20% of Commission Base
Commission Base: Artists will want to make the “Commission Base” as close to a net number as possible, the managers will want to have it be some form of modified gross. For tour income, the typical deductions would be for the cost of sound and lights, opening acts or musicians, some tour personnel, promoter commissions, sometimes booking agency commissions. On merchandise created by the artist to be sold at shows, the artist would get to deduct the cost of merchandise, credit card fulfillment fees, hall fees. On recording funds, the artist could deduct recording costs, producer fees and royalties, mixing costs, musicians, vocalists, arrangers, engineers, vocal coaches, outboard gear, instrument rental. On songs, commission should be excluded on co-writers and any publishing that has to be given up to a third party, such as on a soundtrack where the studio takes part of the publishing.
Term: Most managers do not like to have less than a five year term, but younger managers should expect to see that period broken down into a couple of options, usually performance based options.
Post Term Commissions or “Sunset Clause”: There will be a post-term commission schedule that should apply to specific records that were created and released during the term of the management agreement and the songs in those records, any tours booked but not performed during the term, other elements that you argue about. The manager will expect to take a reduced commission for a period of time. The artist is incented to make that term as short as possible, and these are usually expressed as a percentage of the otherwise applicable commission base. For example, a reasonable post term deal would be 50%, 25%, 12.5% for 3 years post termination (meaning that a 15% commission would be 7.5% during post term year 1, 3.75% in year 2, 1.875% in year 3, and 0 thereafter. The commission base would be limited to product created during the term). If the band gets new management during the sunset clause for old management, make sure that the new management either doesn’t commission what the old management is commissioning during the sunset or they agree to back out the sunset commissions.
Expenses: Avoid surprises on management expenses by limiting actual costs actually spent on your band, no overhead charges, no management travel expenses without prior approval.
Audit: It is always important to be able to audit the manager once a year.
Payments/Power of Attorney: Make sure that the manager cannot cash checks. Good managers do not want to touch the money. Also make sure that the manager does not steer you to a business manager they essentially control. The manager does not need to sign anything on your behalf other than so-called “one nighter” agreements in a form approved by the AFM, or approval of publicity shots if you are not available personally.
Other: There is a lot more to management contracts, but these are the basics. For a more detailed discussion, see Artist Managment Agreements on the Semaphore blog