All You Need To Know About The Music Business
Donald S. Passman
Eighth Edition
‘The marriage of art and commerce has always fascinated me – they can’t exist
without each other – yet the concept of creative freedom, and the need to control
costs in order to have a business, are eternally locked in a Vulkan death match.’
PART 1: Your Team of Advisors
Chapter 2: How to Pick a Team
The main players in your team are your:
1. Personal manager
2. Attorney (Lawyer, zaakwaarnemer)
3. Business manager
4. Agency
5. Groupies
Some facts:
1. You are a business.
2. Most artists don’t like business.
3. Success hides a multitude of sins.
4. Your career is going to have a limited run.
Before you start picking your team, you need to be sure your music is ready for
the big time. When your gut says ‘yes’, you need a recording of your music. The
recording doesn’t have to be expensive, with new technology it’s possible to
create a professional sound in your bedroom. Recording your drive, energy and
enthusiasm is the main thing.
Playing local gigs, get fans to sign onto your email list (build a database). You can
for example offer them a free song for their mail address. Once you have a list,
stay in touch with your fans on a regular basis. Always have something
interesting to say. Give away tickets. Give away merchandise. Give away songs.
Give your fans a chance to get your music ahead of anyone else’s getting it.
The first person on your team is almost always a manager (in the early stages
this is just a friend or relative with a lot enthusiasm) or a industry lawyer.
Managers are expected to help you with your whole career, while a lawyer only
has to spend a few hours getting people to check out your music. It’s the lawyer’s
relationship – not their time – that count. Be sure to check references before
hiring a lawyer. The following sources are useful by picking out your team:
1. Allaccess.com
2. Hits Magazine (www.hitsdailydouble.com)
3. Billboard International Talent & Touring Directory
,It’s important to ensure that agencies, and especially personal managers, handle
your style of music. This is less critical for lawyers and business managers. When
you’ve spend hours of contacting people and finally found a few that are hanging
on, it’s time to meet these people in their natural habitat and ‘screen’ them. This
is a helpful list:
1. References.
2. Use Your Other Team Members.
3. Look Beyond the Sales Pitch
4. Who Does the Work?
5. Fees.
6. Personality.
7. Decide Now – Confirm Later.
‘No one pays as good attention to your business as you do.’
Chapter 3: Personal Managers
The most important aspects of the manager’s job are:
1. Helping you with major business decisions.
2. Helping you with the creative process.
3. Promoting your career.
4. Assembling and heading your professional team.
5. Coordinating your concert tours.
6. Pounding your record company.
7. Generally being a buffer between you and the outside world.
Managers typically get from 15% to 20% of the gross earnings from new artists,
with the majority getting 15%. The managers percentage comes ‘off the top’,
before you divide the money when in a group. Points to discuss when negotiating
the manager’s deal:
1. Compensation.
Sometimes managers share in the net of an artist’s earnings rather than
the gross. There are combinations possible, such as share in the gross for
records and publishing, while sharing in the net for touring. When sharing
in the net for touring, managers sometimes ask to limit the expenses, to
avoid parties and charter jets that eat up the net.
2. Exclusions.
It’s possible to exclude some of your earnings from commission. The
manager won’t be obligated to do any work in the excluded area (though
they often do as a practical matter).
3. Money-Losing Tours.
You can sometimes get managers to agree that, if a tour loses money,
they’ll take no commission on it, or defer their commission until you’re
more successful.
4. Deductions.
Here’s a list of things managers shouldn’t take commission on:
Recording costs.
, Monies paid to a producer of your records.
Co-writers.
Tour support.
Costs of collection.
Sounds and lights.
Opening acts.
The term of a management agreement used to be three to five years. The trend
over the last few years is for managers to have terms geared to album cycles, as
opposed to a specific number of years. It’s fairer for the manager. Most common
compromise is to say that if the artist doesn’t earn a minimum amount, he or she
can terminate the agreement early. If your manager has any sophistication, he
will also say that the earnings figure has to include offers you turn down. Instead
of target in dollars, you can also target in the amount of album sales. By
satisfying the criteria, the manager deal continues for an additional cycle. It’s to
the artist’s advantage to keep the continuation period as short as possible. No
matter what, a manager shouldn’t have a total of more than three to four album
cycles.
Pay attention to commissions after the term! Virtually every management
contract says the manager gets paid on earnings after the term if those earnings
are under ‘contracts entered into or substantially negotiated during the term.’
See page 36 for some sunset clauses to cut commissions back.
A key man clause says that the person with whom you have a relationship with
(the key man) must personally act as your manager, and if not, you can
terminate the deal. This protect you for when ‘your person’ leaves the company,
you can dissolve the agreement so you’re not longer in contract with only the
company.
Two other things you need to be keen on is double commissioning and if your
manager has any power of attorney. Try to avoid both.
Chapter 4: Business Managers
Your business manager is the one who handles all your money. Be extremely
careful by picking him. You should get monthly financial reports. A CPA is a
certified public accountant, that studied for the job. Some business managers
require written agreements, that’s alright, but you should be free to leave
whenever you want. If possible, you should sign all your own checks. Check if
your business manager has experience on your field and situation (starting
musician or superstar). Also check if he has E&O insurance (Errors & Omissions).
E&O insurance pays you when your business manager mishandles your affairs.
Referral fees could affect the advice a business manager gives you. Referral fees
are fees paid to the business manager for sending your business to a particular
place, as compensation for referring you there. Ideally they shouldn’t get such
fee. Be sure your business manager wants to educate you, not control you.
Discuss the topic ‘auditing’ early, to make sure your business manager has no
Donald S. Passman
Eighth Edition
‘The marriage of art and commerce has always fascinated me – they can’t exist
without each other – yet the concept of creative freedom, and the need to control
costs in order to have a business, are eternally locked in a Vulkan death match.’
PART 1: Your Team of Advisors
Chapter 2: How to Pick a Team
The main players in your team are your:
1. Personal manager
2. Attorney (Lawyer, zaakwaarnemer)
3. Business manager
4. Agency
5. Groupies
Some facts:
1. You are a business.
2. Most artists don’t like business.
3. Success hides a multitude of sins.
4. Your career is going to have a limited run.
Before you start picking your team, you need to be sure your music is ready for
the big time. When your gut says ‘yes’, you need a recording of your music. The
recording doesn’t have to be expensive, with new technology it’s possible to
create a professional sound in your bedroom. Recording your drive, energy and
enthusiasm is the main thing.
Playing local gigs, get fans to sign onto your email list (build a database). You can
for example offer them a free song for their mail address. Once you have a list,
stay in touch with your fans on a regular basis. Always have something
interesting to say. Give away tickets. Give away merchandise. Give away songs.
Give your fans a chance to get your music ahead of anyone else’s getting it.
The first person on your team is almost always a manager (in the early stages
this is just a friend or relative with a lot enthusiasm) or a industry lawyer.
Managers are expected to help you with your whole career, while a lawyer only
has to spend a few hours getting people to check out your music. It’s the lawyer’s
relationship – not their time – that count. Be sure to check references before
hiring a lawyer. The following sources are useful by picking out your team:
1. Allaccess.com
2. Hits Magazine (www.hitsdailydouble.com)
3. Billboard International Talent & Touring Directory
,It’s important to ensure that agencies, and especially personal managers, handle
your style of music. This is less critical for lawyers and business managers. When
you’ve spend hours of contacting people and finally found a few that are hanging
on, it’s time to meet these people in their natural habitat and ‘screen’ them. This
is a helpful list:
1. References.
2. Use Your Other Team Members.
3. Look Beyond the Sales Pitch
4. Who Does the Work?
5. Fees.
6. Personality.
7. Decide Now – Confirm Later.
‘No one pays as good attention to your business as you do.’
Chapter 3: Personal Managers
The most important aspects of the manager’s job are:
1. Helping you with major business decisions.
2. Helping you with the creative process.
3. Promoting your career.
4. Assembling and heading your professional team.
5. Coordinating your concert tours.
6. Pounding your record company.
7. Generally being a buffer between you and the outside world.
Managers typically get from 15% to 20% of the gross earnings from new artists,
with the majority getting 15%. The managers percentage comes ‘off the top’,
before you divide the money when in a group. Points to discuss when negotiating
the manager’s deal:
1. Compensation.
Sometimes managers share in the net of an artist’s earnings rather than
the gross. There are combinations possible, such as share in the gross for
records and publishing, while sharing in the net for touring. When sharing
in the net for touring, managers sometimes ask to limit the expenses, to
avoid parties and charter jets that eat up the net.
2. Exclusions.
It’s possible to exclude some of your earnings from commission. The
manager won’t be obligated to do any work in the excluded area (though
they often do as a practical matter).
3. Money-Losing Tours.
You can sometimes get managers to agree that, if a tour loses money,
they’ll take no commission on it, or defer their commission until you’re
more successful.
4. Deductions.
Here’s a list of things managers shouldn’t take commission on:
Recording costs.
, Monies paid to a producer of your records.
Co-writers.
Tour support.
Costs of collection.
Sounds and lights.
Opening acts.
The term of a management agreement used to be three to five years. The trend
over the last few years is for managers to have terms geared to album cycles, as
opposed to a specific number of years. It’s fairer for the manager. Most common
compromise is to say that if the artist doesn’t earn a minimum amount, he or she
can terminate the agreement early. If your manager has any sophistication, he
will also say that the earnings figure has to include offers you turn down. Instead
of target in dollars, you can also target in the amount of album sales. By
satisfying the criteria, the manager deal continues for an additional cycle. It’s to
the artist’s advantage to keep the continuation period as short as possible. No
matter what, a manager shouldn’t have a total of more than three to four album
cycles.
Pay attention to commissions after the term! Virtually every management
contract says the manager gets paid on earnings after the term if those earnings
are under ‘contracts entered into or substantially negotiated during the term.’
See page 36 for some sunset clauses to cut commissions back.
A key man clause says that the person with whom you have a relationship with
(the key man) must personally act as your manager, and if not, you can
terminate the deal. This protect you for when ‘your person’ leaves the company,
you can dissolve the agreement so you’re not longer in contract with only the
company.
Two other things you need to be keen on is double commissioning and if your
manager has any power of attorney. Try to avoid both.
Chapter 4: Business Managers
Your business manager is the one who handles all your money. Be extremely
careful by picking him. You should get monthly financial reports. A CPA is a
certified public accountant, that studied for the job. Some business managers
require written agreements, that’s alright, but you should be free to leave
whenever you want. If possible, you should sign all your own checks. Check if
your business manager has experience on your field and situation (starting
musician or superstar). Also check if he has E&O insurance (Errors & Omissions).
E&O insurance pays you when your business manager mishandles your affairs.
Referral fees could affect the advice a business manager gives you. Referral fees
are fees paid to the business manager for sending your business to a particular
place, as compensation for referring you there. Ideally they shouldn’t get such
fee. Be sure your business manager wants to educate you, not control you.
Discuss the topic ‘auditing’ early, to make sure your business manager has no
