Last time I discussed commissions in management agreements, but what may be a surprise is that management agreements often also have another kind of commission involved – one that remains after the term of the agreement is long over and the manager and artist are no longer working together.
Management agreements often have something we attorneys in the business call “sunset clauses,” which are provisions dictating that the artist must continue to pay a commission to the manager after the term of the agreement has ended. The purpose of this clause is actually for the benefit of the manager, to protect him or her from putting in a lot of work on certain projects, only to have the term end (or the agreement terminated) and not earn any commissions from those projects in which the manager invested a lot of time, effort, and possibly money. A sunset provision is not unfair in itself. If the manager has worked on certain projects for the artist, the manager should be able to share in the money earned from those projects. However like anything in life, there are limits and the sunset provision should be fair based on the circumstances.
Sunset commissions can range in the amount of the commission and the duration for which the sunset commission needs to be paid. Often management agreements dictate the sunset commission at the full rate (often 15- 20% as I explained here) and often lasting in perpetuity, which means forever. A good music attorney will negotiate this commission down both in percentage and in duration because an artist should not be paying a manager his/her full commission rate forever when the manager is not currently working for the artist anymore. Chances are the artist is probably also working with a new manager at this time and paying a full commission to that person as well. A good music attorney should also negotiate the circumstances around sunset provision and to what the commission applies.
The negotiated sunset commission may be a certain percentage for a certain period of years and then end, or start at a certain percentage for a certain period of time then reduce to a lower percentage for a certain period of time before finally ending. This is why it is called a sunset clause, because the commission tapers off and fades away just like an actual sunset. The percentage amounts, durations, and negotiated surrounding circumstances vary depending on the negotiating power of the parties and the attorneys involved, which is why you need a good music attorney experienced with negotiating management agreements.
The sunset clause often surprises artists because they aren’t familiar with the concept and become upset when they see it in the contract, or they sign a contract with a sunset provision that is longer and larger than it should be because the artist does not understand the agreement. I will reiterate, that the sunset itself provision is not unfair, and it is fair to compensate the manager on projects the manager helped to make a success. Again, having the contract drafted or reviewed by a good music lawyer experienced with management agreements is paramount to protecting one’s interests.
If you need a management agreement drafted or reviewed click here to contact me now.
If you need a DIY solution in the form of a template agreement, click here (non-CA residents click here).
Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.
If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.
In a recent article I explained the term of a management agreement
The artist-manager relationship is one of the most important relationships in an artist’s career. The manager has to “get” the artist and the artist’s artistic vision, but also needs to have the knowledge on how to translate that vision into something that will generate mass appeal and profits. The manager also has to have the business acumen and connections to generate opportunities for the artist so that his or her career can grow. An artist needs to be able to trust the manager, feeling that not only is the manager knowledgeable, connected, and in tune with the artist’s essence, but also that the manager is at all times acting in the artist’s best interests instead of serving the manager’s own needs.