[We proudly offer a guest post authored by esteemed colleague and articling student Ben Iscoe, with an assist from yours truly. I’m proud to say that I actually knew Ginuwine’s real first name before I read this article.]
Elgin Baylor Lumpkin (the performing artist better known as “Ginuwine”) is being sued by his former manager. For those familiar with the R&B star, one could make the (terrible) pun that he is being asked to “Pony” up dough for outstanding royalties. But how did this lawsuit come about? It is unlikely that Ginuwine and his manager entered into their artist/manager relationship with the expectation that it would culminate in litigation. What went wrong? Could Ginuwine have done anything differently to avoid this costly and time consuming ordeal?
Musicians, generally speaking, are not business people; they are musicians. Elvis, “The King”, may be one of the most iconic musicians of all time, but behind the scenes Colonel Tom Parker was managing his way (in the extreme case) to half of The King’s earnings. Was this a good deal for the King? The answer depends on one’s point of view. Elvis himself said “I don’t think I’d have ever been very big if it wasn’t for [Parker]” reminding one of the adage “50% of something is better than 100% of nothing.”
So how does an artist know if they are entering into a favourable, or even equitable, manager/performer relationship? How do future Ginuwines minimize their risk of litigation or more generally, entering into an unfair agreement? Artists spend their time composing that addicting hook coming out of the bridge; Business 101 is likely on the backburner.
Below are general guidelines for artists when contemplating whether to enter into a management agreement. This list is not exhaustive, but merely meant to be a helpful tool and should not be interpreted as a substitute for obtaining legal advice.
1. Defining Expectations
Almost all artists will say that they want their manager to help them grow/make a livelihood performing their art. What does this mean? Vague terminology is a recipe for future tension. For instance, does the artist want to handle their own merchandise or have the manager handle this? Does the artist want to plan their own tours and just have their manager shop their album? It is impossible to include every detail, but artists should be as specific as possible to ensure that all parties are of the same understanding. It is better to disagree on specifics up front (when there is little or no commitment) as opposed to when the relationship is long established.
How long do you want the artist/manager relationship to last? It is probably advantageous for the artist to enter into a short term contract, and then renew if the manager is delivering to the artist’s satisfaction. However, if the artist is unknown, it is unlikely that much income will be generated in the first couple of years. Therefore, the manager will want a longer contract as they would find it unjust (and a horrendous commercial practice) to allow another manager to reap the fruits of their labour (i.e. they spend the first couple of years helping the artist establish themselves only to have another manager start collecting 20% once the artist begins generating significant revenue).
This is an area where the artist, especially an unknown artist, will have to give the manager some slack. Whatever the case, specify a period of time.
Does the artist expect to be the manager’s sole client? If so, it is important to specify. For an unknown artist, this is an unrealistic ask. As mentioned above, it will likely be a while until an unknown artist will start to generate significant revenue. Asking a manager to rely on a percentage of a minimal (or perhaps non-existent) income for any period of time is unreasonable.
Where does the manager have connections? Are they a mover and shaker locally, but not nationally? Perhaps they have every domestic record exec on speed dial, but have no international connections. In a smaller market, Canada being a prime example, artists may have interests in growing outside their national borders (i.e. in the US). In such a situation, the artist may want to be mindful to specify what areas are covered by the management agreement? For instance, emphasize that one manager will be the artist’s exclusive representative in Canada, but not the US.
Keep in mind, people respond to incentives. If an artist wants to penetrate the US market and their manager will not generate any revenue from the artist’s activity there, why would the manager make any efforts south of the border? Carving up territories should be used if the artist believes that they can establish themselves in a specified market without the manager’s assistance. This may be accomplished by either (a) the artist’s own connections to the market; or (b) another manager who will have exclusive responsibility to that other market (i.e. the artist will have multiple managers to cover multiple markets).
As mentioned above (and to be reiterated throughout), a manager is unlikely to be making much money off of the artist in the artist’s early days. Despite this lack of revenue, the manager may need to spend money to assist the artist’s career. If the manager is going to survey a venue, s/he will need to drive to the venue and park; who should pay for their gas and parking? If the artist is hoping to have their manager arrange a tour, the manager will likely need to call a plethora of out of town venues; who should pay for their long distance calls?
These trivial sounding expenses may rapidly culminate in a bill the artist is ill equipped to pay. At the start of the relationship the artist and the manager should specify what expenses the artist will cover. It is not feasible to cover all possible scenarios, but a management agreement should attempt to cover general categories (like those identified above) to avoid future disagreements. The artist may also consider creating caps for certain categories. For example, in a given month, if long distance costs exceed ‘x’ dollars, then additional permission from the artist is required. It is important to consider how much discretion or oversight the parties want built into the relationship.
Whatever your arrangement, it is crucial that any expenses require receipts.
The days of Colonel Parker and managers receiving 50% are over. Seemingly, a manager’s commission floats between 15-20% of the artist’s gross income. This may seem significant, but in the early stages of the artists career 20% of nothing is still nothing. This number may only lead to significant income for the manager once the artist has made it big, and there is likely a direct correlation between the rise in the manager’s income and the value the manager has added to the artist’s career.
There is no reason for a manager to receive any payments upfront. A manager’s revenue should derive from the fruits of their labour, not an artist’s vain desire to say “I have a manager.” Artists should be mindful of indirect attempts for managers to elicit money up front. For example, artists should be wary of the manager who has a financial interest in the studio where (a) s/he wants the artist to record their next album; or (b) have promotional photography done. That is not to say that these facilities should never be used, but rather that artists should be cautious to ensure that the rates at which they are being charged remain competitive with the industry norm. If in doubt, artists may be wise to use other facilities (and see if their manager maintains their interest in representation).
Compensation should also specify for what activities the manager should collect a commission. What about merchandise? What if the artist begins writing with or producing for other artists? What if the artist gets into acting? What about the artist’s pre-existing revenue streams (e.g. endorsement deals)? Or as in the case of Ginuwine, how should royalties be determined?
A management agreement will likely contain a provision that allows a manager to extend the relationship. Such a provision is somewhat standard, but the nature of the option to extend must be clearly defined. The option should specify (a) how often the option may be extended; and (b) for how long the relationship may be extended with each option.
Conversely, the management agreement should state how either party may exit the relationship. The desire to exit the relationship may be difficult to visualize at the time of formation; at this time the manager and the artist should be enthusiastic about one another (if not why enter such a trusting relationship). The terms of the agreement should address what happens when this relationship is no longer harmonious, more specifically what are each parties’ obligations when either party wants to end the relationship.
What compensation will the manager be entitled to once the artist/manager relationship has concluded? The manager will argue that a portion of the artist’s revenue received after the artist and manager have parted ways derives from the labour of the manager (e.g. the manager secured the recording contract that continues after the conclusion of the artist/manager agreement). Consequently, the artist and manager should consider sunset provisions. These provisions entitle the manager to a certain declining percentage of the artist’s revenue in the years following the conclusion of the contract (e.g. 15% for the first year after the conclusion of the contract; 10% in the 2nd year; 5% in the 3rd year; and no compensation going forward).
8. Power of Attorney
Does the artist want the manager to be able to sign on their behalf, or only after checking with the artist first? Can the manager sign on the artist’s behalf when it comes to certain contracts, but not others? Include in any management agreement a power of attorney that clearly demonstrates under what circumstances the manager may sign on the artist’s behalf. For logistical reasons, this type of provision may prove helpful; sending an email to a manager to give them permission to sign a document on the artist’s behalf could save valuable time and money.
 For those unfamiliar with the R&B Star, 1996’s “Pony” was the name of arguably Ginuwine’s most well-known single.
 Example taken directly from http://musicians.about.com/od/beingamusician/bb/managercontract.htm.