A Star is Born: Evaluating Management Agreements for a Celebrity
By Christopher J Sherliker
Ask any eight-year-old what they want to be when they grow up and odds-on the answer will be one word: “famous”.
Gone are the days when children aspired to be cricketers or ballerinas. The culture of celebrity is now well ensconced in the British psyche – just watch any of the main television channels at the weekend.
As a result, the growth in artist management continues seemingly without limits – and now even impacts on those just starting their careers. Jonathan Silverman is often asked to advise celebrities and management companies. Here, he gives his personal top 10 checklist...
A management agreement meeting for an artist, performer or sportsperson is an opportunity to ensure there are adequate protections in place for the client, who is likely to have little experience in business and may well not have anyone around them to help. A daunting prospect when faced with a seemingly sophisticated offering from an established management company, perhaps offering fame and fortune.
Whilst the principal role of the commercial lawyer is to advise on the contractual terms, it is the one who is prepared to go “the extra mile” to verify the credentials of the prospective management and to check on the remuneration structure who is likely to maintain that client relationship when the client’s career really takes off.
So here is what I look for when presented with a management agreement:
- Do some simple due diligence on the management company and its directors or principals to ensure they do not have a chequered past. I see if they will let me speak to other artistes’ advisers to gain a level of reassurance that the management do genuinely deliver to their clients.
I also talk to the client generally to ensure I am comfortable that there is no degree of undue influence occurring, often the case with young star-struck artists, performers or sportspeople.
- Check the client’s age – if he or she is under 18, then remember that a parent will need to sign the contract (and it is worth checking, if possible, that both parents are in agreement), and consider re-executing the agreement once the client has turned 18.
- Look carefully at the extent of the management being offered. Does it extend to all the areas of activity in which the client is likely to participate or just one specific skill set? Will the management financially benefit from spin-off rights or a change in career? How long is the contract intended to last and does it have reasonable termination provisions? Will the manager enjoy a share of earnings after the end of the contract and, if so, at what rate and for how long?
- How is the management to be remunerated? Are there any safeguards about incurring expenses? Will they be charged directly against the client’s earnings or perhaps unilaterally deducted in addition to the management fee? Are there safeguards to ensure that the manager cannot simply enter into contracts on behalf of the client without prior approval?
- Consider carefully how the client’s earnings are to be handled. What is the proposed route – through the management company? If so, take care to ensure the proper protections and safeguards are established, including a regular right of audit and perhaps requiring a counter signature on cheques above a certain level. Identify how gross earnings are to be computed and against what earnings management fees are to be levied.
- Look at image rights and IP protection, and ensure that steps are put in place to protect the client’s interests for the immediate and long term as their career develops. If the client has a successful career, then the earnings from those rights (income from licensed merchandise, trade mark registrations, Guernsey image rights and so forth) may well continue for many years thereafter.
- Consult experienced specialist accountants to ensure the management agreement is both commercially viable and equitable from your client’s perspective, both now and in the long term.
- Whilst you’re talking to the accountants, do not overlook the client’s potential tax position – it’s never too soon to plan.
- Ensure that any prospective management puts together a business plan for the client before they sign the agreement, and that the agreement expressly obligates the management to take an active role in promoting the client throughout the term of the agreement.
- Finally, try to ensure that, however much the manager seeks autonomy, you build in realistic safeguards and protections for the client so they have the final say on their artistic and business future.
By getting things right from the start, there is every prospect that a successful career for the celebrity client also means a successful lawyer/client relationship for years to come.
Added: 4th July 2013