1.0 The Nature of the Contract

1.1 Difficulty of Enforcement

Management contracts are essentially straightforward in their nature. They are contracts for the supply of personal services. A management contract will describe the services to be provided by the manager and will specify how he or she is to be paid for those services. The main significance of this is that a management contract cannot be specifically enforced. The obvious analogy is that of an employment contract. An employer may enter into a fixed term employment contract with an employee for say three years. If the employee leaves without good cause after one year then he or she will be in breach of the employment contract. The employer would be able to sue the employee for breach of contract. Generally, however, the only remedy available to the employer in any such legal proceedings would be for an award in damages. The employee would be compelled to pay the employer a sum of money equal to any financial loss which the employer is able to prove to the satisfaction of the court that it has actually suffered as a result of the breach of contract. The employer would not be able to obtain from the court an order for specific performance (i.e. the employee would not be made to continue to work for the employer for the remaining two years). An artist and his manager are in a similar position. If the artist walks away from the management contract before its term has expired the manager will be entitled to damages but he or she will generally be unable to compel the artist to continue to allow the manager to represent the artist.

1.2 “Disguised” Management Arrangements

For fear of being “sacked” and left only with a right to sue for damages, some managers try to protect their position by entering into alternative contractual arrangements with the artist. A “de facto” manager may prefer not to enter into a management agreement but instead to require the artist to enter into recording and publishing agreements the effect of which is that the “manager” is exclusively entitled to the artist’s songwriting and recording services and owns the copyright and all other rights in the artist’s songs and recordings. The “manager” then seeks recording and publishing deals for the artist but it is the “manager” (under the guise of a production company or publisher) which enters into the agreements with the third parties concerned. Sometimes, the “manager” also requires a management contract to be signed. In this way, the “manager” prevents the involvement of any other manager and secures a financial interest (by means of management commission) in any of the artist’s earnings from activities other than recording and songwriting. In the worst cases, the “manager” will retain all of the recording and publishing rights, pay a royalty of some kind to the artist, and then “double dip” by claiming (under the terms of the management contract) a percentage commission on that royalty income.

“Disguised” management arrangements of this kind are properly treated with some scepticism so that when an artist is presented with a contract by a manager that contract will normally be a management contract rather than a recording and/or publishing contract. This is not to say that production contracts (i.e. a recording contract entered into with a small record production company) do not have a place in the music business. Arrangements of this type are often justifiable in their own right but they are not appropriate when they are used to disguise what is essentially a management arrangement.

1.3 Joint Ventures

Nevertheless, there are circumstances in which a manager may be justified in seeking a greater degree of protection than is provided by a “standard” commission based management contract. In fact, those circumstances now apply more frequently than before. As noted earlier, it is a trend for record companies to do less than in happier times and for management companies to fill the gap. Management companies invariably have a more proactive role in the marketing of a record than before. This may be true if a major record label is involved and will almost certainly be true if the strategy does not involve a major record label. If the management company assumes a significant overhead in terms of staff levels in order to provide a wider “management” service and/or if the manager makes a significant financial investment in the artist (for example by paying for recording and/or video costs and/or by providing tour support or general financial assistance) then the manager may be justified in seeking a greater level of protection. In some cases, the manager may wish to take the approach described in paragraph 1.2 above (by offering a production contract and/or a publishing deal). It may be that the level of the manager’s investment and/or the true nature of the manager’s role justify an approach of this kind. An alternative, which is finding increasing favour, is for the manager to enter into a joint venture with the artist. A company (or a limited liability partnership) is usually incorporated to serve as the vehicle for any such joint venture. At the heart of this arrangement lies the fact that the company (and thus, indirectly, both parties to the joint venture) co-own any available rights. An artist should always be wary of entering into arrangements of this kind but there is certainly a trend for more and more managers to insist upon them. As the landscape of the record industry continues to change, it is likely that management companies will continue to play a wider role than before. If managers have to be more entrepreneurial than before in order to help their artists succeed then it is no surprise that they may seek to re-evaluate their own position and, in particular, to seek an element of rights ownership for themselves. This is problematic for the artist community because, as we will see in the next chapter, the record companies are also engaged in a “land grab”, often insisting upon so-called 360o deals under which they own (or at least have a financial interest in) not only the artist’s recording rights but all other available rights.

The remainder of this chapter is concerned with “proper” management agreements rather than with joint venture or other alternative arrangements.