Representation

11

Artist managers bring representation, administrative supervision, and surrogate control to an artist’s complex image and long-term career. A developed strategic management plan links the business and creative systems of the artist’s career together. Career goals are established based on the perceived commercialization or “branding” of the artist’s image and talents. Managers act as gatekeepers, selecting only the recording deals, concert appearances, and staff members that can best enhance the artist’s long-term goals. Managers supervise everything connected with the business of the act. Booking agents are hired to establish contacts with promoters, who create concert appearances. Business managers are added to the team to control the revenues and take care of the accounting, taxes, and investments. Road or tour managers hire security, roadies, and everyone else needed to control all aspects of the tour. Attorneys are hired for legal opinions and representation concerning legal issues. Publicists and marketing experts provide artist interviews to retail stores and the mass media to promote the act in addition to the work being done by the label.

The Local Market

If you just want to sing and skip the business of being a popular culture icon, then find employment as a musician, a soloist in choral group, an opera singer, or a BGV (background vocalist), or all the above at the same time. The world is waiting to be entertained, so go for it, and get paid in the process. It is helpful, even in a local market, to know sight-reading and have quick memorization skills, a positive personality, knowledge of the copyright law, music publishing, accounting, marketing, publicity, business management, promotion, and a basic understanding of the music business. It’s even better if you can sing in tune, love contributing to the group, and have fun helping others. It important to understand that when you pick up your guitar, sing in a choir, write your book of poems, or shoot a local video that you are a vital part of the entertainment and music business. The next great songwriters, authors, producers, directors, singers, film production teams, and industry executives will come from your generation. So, get on with it and may the best be given their chance to entertain more than the local fans.

Passion for Success

Major label executives often describe artists’ passionate drive for success as a prerequisite to offering any deals. They also need proof of a growing buzz caused by strong local performance success, airplay, Internet and social media presence, and a wow showcase. Then, of course, they will investigate your work ethic, personality, and any closet issues that may increase their risks of a reasonable return on their financial investments. If they are going to dump a million dollars into your career, they want to make sure that you’ll be able to handle the hard work and mental stress of success. At some point they know, and so should you, that you’ll need professional management and legal advice. The bottom line is simple: once the label is satisfied, then they need the act to have personal and business managers, plus top-notch booking agents and in some cases established and highly connected talent agents. These are the professional managers who will help the artist make the important career decisions often required to earn the spotlight of success and a ton of money in the bank. It’s also a safety net for the label’s investment to know their new acts are working with top industry representation to correctly direct and build the artists’ careers.

The Importance of a Buzz

Now you know that it often takes millions for labels to be in the entertainment business, and tens of millions for the stars to be in the movie business. What does it cost the act to work on the road, touring? And where does their money come from? The most important question that needs to be answered is why would a promoter (or a nightclub owner in a small market) want to hire your act to perform? Why would a director and movie producer want to finance your book into a movie script and then into a major film? The answer is simple: they want to make a profit. Artists tend to think it’s about them, their creativity, and so forth, but it’s really about exploiting an act’s talents and fame or reputation in exchange for profit. That how important the buzz is, as it’s easier to get hired for a tour or by talent buyers for nightclubs if you’ve been heard of. It is also a lot easier for film companies to secure money from producers if they have a “bankable” star signed to be in the movie project. How are you going to become known by the people who could employ you and your band?

Fame

Fame is built on the act’s creativity and the label’s risky investments to profit from the brand—building recordings, promotion, publicity, and marketing that stimulate revenues from many sources. It’s the same for the film, book publishing, computer game, and theater businesses. Let’s start at the beginning as a creative artist who wants to build a career as a touring musician/vocalist, and possibly if you catch on, you can become a known personality and, who knows, a superstar. Let there be light! When the talent is ready (rehearsed) then it’s time to play some gigs. Many performances are free or darn close to it when new acts crank it up. However, once you start to build a following, then you’ll be able to sell yourself to bigger venues based on your successful track record. It takes time, sometimes years, as it took the Beatles several years of local gigs and then several months in Hamburg, Germany, playing many long shows in some of the city’s sleaziest clubs to develop their unique sound, performance, and show.

Jumping Off the Cliff

One of the hardest things for anyone is to face rejection. If you’re an artist of any type, such as a writer, actor, recording musician, or performing artist, it’s even tougher. It’s easy to live on the adrenaline rush and think that someday you’ll be discovered, and then become rich and famous. It doesn’t usually work that way at all. Years ago one of my favorite places for lunch was the Green Hills Grill (which is now closed). I remember sitting next to famous artists and their families lots of times. Little did I know that funny little girl over there at the next table would grow up to become Miley Cyrus. Or that I’d get into a discussion with actress Florence Henderson, who played the mother on the TV show The Brady Bunch, or Sam Phillips (at another place and time), who discovered Elvis. There are, of course, many stories of famous people I’ve met over the years, yet they all have one thing in common. They all had to start somewhere, and you’ll have to do the same no matter what you want to do in the industry. So go for it!

Networking

First, you need to get noticed by someone in the industry who can connect you with others in the industry, which will lead you to meeting others. Networking is vital to getting your shot at a career in the business. Of course, don’t ask for a picture or an autograph as that is usually seen as a thing fans do and not what serious people who want careers want. Instead, think about what you can contribute to the industry that can make it more successful and more profitable. When it comes to being a recording artist as a musician or singer, you’ve got to perfect your talents and live performance show before anyone will consider signing or hiring you for gigs. So do it to the point where you’re sure you’ll be putting on your best show, performance, or whatever. Then find a place that will let you play for free or maybe get a cut of the door (ticket sales). The club owner or talent buyer who places you into a club or performance hall will determine your success by one thing, how much money they made or lost. How much money was generated from ticket sales, booze, food, merchandise, and anything else they can sell? The fans may love, hate, or not even pay much attention to your show, but it’s the amount of money generated that counts.

You’re probably there for a different reason, to entertain the people in the seats and on the dance floor. The hope is the people who attended will start talking about how much fun they had and how much they enjoyed the band (you). If that happens and the money is flowing, the word starts to spread and the next thing you know, you’ll be getting offers to play for more money and you’ll be on your way. Isn’t the buzz a wonderful thing? However, it’ll cost money to put the show on the road and to tour small clubs. Let’s look at an example.

Building Your Career Team

In this example, a band played a local gig and made $90 after the expenses for travel, food, CDs, and T-shirt manufacturing were calculated. However, it’s also got a $30 monthly payment for equipment, which is not unusual. The hope is that by performing some free gigs and then small clubs for a little money, you’ll be able to draw a crowd, build a fan base, and create a buzz. If the club owners start making money you’ll be asked back repeatedly. If the momentum grows and the buzz increases then you’ll be able to seek representation and start a small club tour. But you’re the one who will have to find the gigs and pay for the equipment and all the bills generated by the band. The goal is to create a buzz that grows to the point executives in the industry start hearing about you or your act. Just as industry career professionals are often hired by word of mouth, that’s how bands also get noticed. As soon as the industry executives perceive your act as something that’s creating a market, they will check it out to determine its potential value. With experience and successful building of the fan base, this is the time when the act may want to write a pitch memo to label executives and invite them to a showcase, as we talked about in previous chapters. If—and it’s a big if—the industry executives start taking you (the act) seriously and they decide to analyze your potential financial success vs. their investment costs, you may also receive a showcase request, as we talked about in the previous chapters. When that happens you need to start building a team of experts who can help you make the right decisions.

The Next Big Thing

There are many professional industry executives also looking for the next big thing. Consider using an attorney, talent agent, booking agent, and, when you’re confident that you’re good enough, a more highly successful personal manager. They all represent different types of artists who work in various areas of the business. Want to be a film actor? Then find a talent agent who is also connected (sanctioned) by SAG-AFTRA. If you want to be a stage actor then you need representation by an Equity-sanctioned talent agent. Want to set up concert tours as a performing artist? Then you need a booking agent licensed by the AFM. Want someone to take care of the business and money? Then you need a business manager with industry contacts and hopefully an accounting degree. Let’s take a look at the creative business chain of events that usually happen in different areas of the entertainment business.

Chain of Representation

As a good example of creative representation let’s take a look at the path for a book author to find a literary agent, who then attempts to place the manuscript with a book publishing company.

Major Representation’s Power

If you have been offered a major label record deal, then quickly find an entertainment attorney with a stellar reputation within the industry. Similar to the way you would vet an entertainment attorney, there are unions for actors who perform the same functions. The key thing is that you find someone who is trustworthy, ethical, and professionally qualified to be part of your creative team. Check with industry sources, such as Billboard, Pollstar, Celebrity Access, and local union offices, to see if they have them listed in their directories (SAG-AFTRA for singers, actors, etc., AFM for musicians, and Equity for stage work).

Since representation is based on contracts as well as types of functions, in what follows, we will look at the types of representatives there are for you in the industry and what some of the particular legal and contractual concerns are should you choose a career in the entertainment or music industry.

Personal Managers

While most talent agencies are responsible for the worldwide employment of creative authors, artists, and production talent, personal managers are usually responsible for the career development of recording and performing artists. Personal managers guide and provide advice to newer artists about their career decisions. Ask yourself a question: what can a manager do for me that I can’t do myself? The answers should be very clear, and now you know what you need to look for in a personal manager. Thus, the first step of a prospective artist is to find the perfect manager!

Advice and Consent

In general, the role of the personal manager is to counsel, assist, and supervise the development of the artist as a professional act. Obviously, to be able to successfully accomplish this mission, the manager needs experience, contacts, wisdom, specific industry knowledge (not often found in books), and good old common sense. They need to understand and love business! They should value the power of entertainment and monetizing consumers’ emotional connections to entertainment.

However, personal managers are not talent agents and in some states they are banned (as a conflict of interest) from seeking employment for the acts they represent. Their job is to approve work “pitched” to them by booking agents (for concert tours), publicists (for articles and radio, personal, and TV appearances), record labels (for approval of recording issues and promotional ideas, etc.), and other business offers. Managers are not song pluggers, record producers, or record label executives, so their main job is to build the artist’s career through advice, experience, contacts, wisdom, and solid career-based decisions. Artist managers rarely give a “yes” to anything unless it is something that is in the best interest of the artist. They often seek out only those industry insiders who can benefit the artist’s image and career.

Table 11.2 Industry Representation. Here you will see a brief description of the various types of creative representation found in the entertainment and music industry. A note of caution is to check on their success and track record before signing any deals. Beware of the big talkers, namedroppers, and others who may or may not be able to successfully represent you and your creative products to the industry executives.

Representation	Industry	Job Description	Who They Represent	How They Are Paid
Talent Agent	Film and visual media; tour music industry	Advice; find employment	Actors; recording artist personalities; writers; film production	Percentage
Booking Agent (AFM)	Music for American Federation of Musicians	Advice; tours, musical performances	Musicians for tours and performances	Percentage 10%
Personal Manager	Music industry; tours, image, promotion, publicity, song selection (advice)	Advice	Major recording artists; touring musicians	Percentage 15%–20%
Performance Union Agent (SAG-AFTRA Equity)	American Federation of Television Radio Artists for video; SAG for actors in film; Equity in stage	Advice; find employment	Film, video, and stage actors	Percentage 10%
Business Manager	Music, film, and stage	Control money and financial investments, plus taxes	All	Hourly, salary, or retainer
Attorney	Music, film, and stage	Negotiate, write contracts, advise artist and managers	All	Hourly, salary, or retainer

It is the artist’s responsibility to pick the right manager, someone who will make a great impression, be well respected by record label executives and talent agents, and be able to work and communicate well with the key industry figures. Don’t hire a friend or relative because their lack of experience and poor decisions will affect your career and income forever! As an artist, you have to be able to say “no” to friends and family. If you can’t, the manger will say “no” loudly for you. You need professional representation if you want to have credibility within the industry, and friends and family are not the right people to represent you to industry executives.

The Gatekeeper

Because we live in the digital world, opportunities for artists to succeed without a manager have increased. Still, someone has to do the work, take the time to market the act and their products, and build a plan based on a strategic business management model. Select a manager who can help you as an artist create, manage, and accomplish it. A manager is the gatekeeper, keeping all the people, hangers-on, fans, and negative family, friends, and others away by saying, “No, no, no.” Time really is money in this business, and so are the artist’s name and image, which if connected to bad products or merchandise, bad news stories, rumors, politicians, and so forth can be destroyed beyond repair. It is the manager’s responsibility to fend off all the negative stuff and approve only people, products, and connections that are in the artist’s best interest. Publicity hounds that can attempt to soften a bad reputation and maybe turn it around are expensive. Also, if you are signing a recording deal, the label will make sure you select a manager it approves of and supports. It wants to make sure its investment in you as an artist is going to have a better chance of success by encouraging you to select an established, respected manager.

Trust

The artist usually hires the manager, but signs with the management company. How weird is that? I hire you but then I have to sign a contract with the person or company I hired. I am the boss, but you’re going to tell me what to do. Strange—so make sure they really know their stuff and are worth the time, effort, and money. The artist management relationship is built on trust in this emotionally high-strung industry. The artist has to trust the manager to make the right decisions, give the very best advice, and build the artist’s career, sometimes over the manager’s own. The manager has to trust the artist to follow the advice given, stay healthy physically and mentally, work, work, work, and always exploit every opportunity to make use of shameless self-promotion. Before signing a management deal, which may tie you up (the artist) for as long as seven years, establish three goals and have them added to the deal.

First-Year Goal

Set three goals with anyone you’re considering as your personal manager. The first-year goal is extremely important because it is the lynchpin to a successful career. Your first-year goal is either a major record deal (360) or a planned structure analysis (full financial business plan) of how the manager will launch your career if you’re not aiming at becoming a known national or global personality. A full business plan is wise in all cases, yet with a major record deal most of what will be happening and the corresponding financial investments are taken care of by the major label. However, having a business plan at the start of the career will be very helpful to the act and manager. It will help you determine if your career is on track, and if the advances and recording commitments and financial investments are reasonable to fund the launch of your career and to sustain it.

If you’re not going for the major label deal, then how are you going to make money? That’s the reason for the business plan and the corresponding details on how you’re going to be “discovered” (and how much to budget) for promotion, publicity, and marketing of yourself (as an act) to promoters and club owners. At some point you may have to consider paying a booking agent (not connected with the AFM, if you’re not in the union yet) to find free or buy-on tours to get you started.

Third-Year Goal

Your second goal actually happens in the third year of your contract with your personal manager. If the manager helped you acquire a major label deal in the first year, you’ve finished your first album and probably had a couple of singles released. You’ve also experienced two to four weeks of national promotion with radio (tour and airplay), publicity with local and national TV talk shows, stories planted in the press and trade magazines, social media and website presence, and other types of promotional opportunities. You’ll probably also think you’re in debt to the labels for more than a million dollars but by now, you know that’s their debt, not yours. Still, they will recoup 100% of the all-ins from album sales and a negotiated percentage of all your other revenues (including concert ticket sales, merchandise, and corporation sponsorships) to recoup or pay off their investment and make a profit (they hope). The label, you, and your manager will know by the end of the first year if you’re catching on with the public, and the label will have its accountants analyze the books (money made or lost) to decide if it is going to pick up your option.

Options

Labels always look forward instead of backwards when it comes to picking up an artist contract option. Once the initial year is complete (or 60 days before the end of it) the label must determine if it wants to pick up the act for another year (option). After the initial year the deals are optioned by the label as another period of time (usually one year) and number of recordings (usually one).

If the label decides to pick up the next option, then the artist receives another year and another album of which the label will fund all the bills that are approved, and the act receives another advance. Why would a label pick up the option? It quickly looks at the first year to determine the potential growth for the next period.

While we don’t generally think of people as lines on a bar chart, let’s compare and ask ourselves which artist’s option a label should pick (see Table 11.3).

Clearly, Artist A’s manager will want a significant increase in royalty points and higher percentages on other revenues as his artist has made the label almost $2 million. Artist B’s manager is hoping, begging, and pleading for another shot, but his act has lost the label almost $2 million. Which act will the label pick up? Again the labels are interested in how much money an act will make in the future as they consider the past as gone, gone, gone. Which artist is decreasing in sales and which artists are starting to really catch on with the public? Look at the skew lines and you’ll see the label will probably pick up Artist B’s option and release Artist A, as his sales are quickly declining.

If the label has picked up the first and second options, then you should be rocking and not a slave to the system. However, if you’re making money, the label is making more and it will want more and more out of you to increase its profits. When you’re hot you’re hot, and that’s the time to turn the fans’ enthusiasm into cash if you’re really successful. You’ll think you’ve been on the road forever, selling everything with your name and logo on it. Great, but you’ll need to also take care of the stress caused by the constant work of being a known personality, and you’ll also have to pay for all the people in the band and on your management team.

Table 11.3 Picking up the Option. Which artist’s option should the label pick up? Artist A has made $1.75 million for the label and Artist B has lost $1.75 million of the label’s money. Here’s a hint: consider the present, project the future, and forget the past.

Artists	First Album	Second Album	Third Album	Totals
Artist A	1,000,000	500,000	250,000	1,750,000
Artist B	–1,000,000	–500,000	–250,000	(–) 1,750,000

At the end of the third year, your second goal is to have $3 to $5 million in the bank after taxes. Careers are usually not forever and you’ll be working harder than you ever imagined if you’re one of the chosen few. So put most of the money away. In all honesty, that’s not a lot of money for yourself as you’ll have to generate much more money to pay all the bills and all the people working for you and fend off all the relatives and do-gooders who assume you’re filthy rich. Just tell them you don’t control the money, your manager does, and he’ll always tell them no—buzz off.

If you’re not going for the big time and want to just make a great living as an entertainer, then you’ll need to follow the goals established in your business plan. People get married, have kids, and need to invest in IRAs and 401(k) plans. Therefore, you’ve got a bright career ahead of you if you’re smart. Think about it this way; most of us have to work 40–50+ hours a week to make a decent living. Entertainers have a different situation, although you’ll have to find the opportunities, as you’re really an entrepreneur entertainer.

Career Musicians

Assume you’re a musician in a band playing cover hits. You make $200 a night working four nights a week for three and a half hours. You’ve made $3,200 a month, working only 14 hours a week. Let’s take the month of January off and work only 11 months a year. Now, you’ve made $35,200 a year working 14 hours a week. Let’s say you create your own record album, using Pro Tools, press it, and sell it off the bandstand and on iTunes and CD Baby. It costs you about $2 per album to pay the mechanical license (for the cover tunes), and to press and have the CDs delivered. You also start your own website and sell digital versions, plus merchandise over the Internet. Let’s say you sell only 2,000 albums off the stage and Internet combined. But you sell them for $8 each, making a profit of $6 times 2,000 units, for a profit of $12,000. Now, you’ve made $47,200 and you are still working only around 14 hours a week. Sell some merchandise at the local bars, restaurants, or whatever, and pick up a few gigs, and you’ll probably make $60,000 to $70,000 a year and work only about 20 hours a week. However, to do this successfully you’ll have to put on your business hat and manage your career yourself. By the way, you’re the one with the talent and the smarts to profit from it. Good for you if you make a very good living and have to work only a few hours a week.

Fifth-Year Goal

If you’ve been in the business as a superstar or major artist and find yourself in the fifth year of your management agreement, plenty of other successful managers will want to represent you. Have you reached your fifth-year goal of $10 million after taxes, free and clear (without debt) in the bank or in secure mutual funds or the stock market at the end of five years? Management contracts are similar to recording deals, as you’ll usually be required to give up your side of the yearly options in the deal. The manager makes the decision if he or she wants to continue the deal or not. The one-, three-, and five-year goals written into the deal establish performance or reversion clauses that give you an out if the goals are not met. What if your manager helps build your career in five years to the point where you’ve got only $7 million in the bank or market? The choice is yours.

Early Termination

The artist hires the manager and can also fire the manager, but you’ll probably have to continue paying the fired manager until the end of the deal (maybe seven years). That’s the reason for the reversion clauses in the deal as suggested in the one-, three-, and five-year goals. They either accomplish it or fail. Sometimes the breakup of an artist and manager is similar to a divorce as lawsuits and counter-lawsuits are not uncommon, with the manager claiming commissions on the artist’s future royalties. Unless there has been some kind of criminal conduct by the manager, he or she usually wins, gaining partial royalty payment for a limited time.

Post-Term Management Royalties

At the end of some deals, the manager may write into the deal that he or she will continue to receive a part of his or her commissions based on the idea that the act’s future success is due to the management team made during their tenure. Be careful when you see this type of language in the management deal.

What does this really mean? If your deal was for seven years, then you’ve got to pay the former manager for another 15 years at a decreasing percentage of your gross income, even though he’s not your manager! That’s a total of 22 years. Wow, be careful to say the least. In addition, if your deal ended and then you picked up another manager, you’d be paying both of them, which means a large chunk of every dime you earn would have to be paid to the current and past managers. Don’t turn yourself into this type of slave.

Types of Personal Managers

There are several types of personal managers in the business, and their success is generally based on their ability to help artists become rich and famous. Timing is everything, as the act’s position in their career (new, established, superstar, etc.) determines the level of managers employed. If you are a new artist without label or music company support, securing a major or “heavy hitter,” established manager is unlikely. If you’re an established artist with a career buzz and consumer momentum, then there is the possibility of gaining an established management company for representation. Someone in the office working for the kingpin represents the act, which is fine as the power of being represented by an industry-famous manager (or his or her company) opens many doors. Superstars are often represented by only a handful of the most highly established industry-famous (often unknown by the general public), powerful personal managers who have earned respect based on their track record (the successes of major artists they have helped in the past).

Timing

When does an artist really need a manager? The answer, of course, is only when the personal manager can do things for the act that they cannot do for themselves. The other side of the question is when does a manager need a specific act? The answer is when the act is ready (creatively, mentally) to dedicate their time and talents to growing their career as large as possible. Possibly they still need to do more, such as create an industry buzz through marketing and media appearances, build a significant fan base, and try to get the best possible label deal. They can’t do it by themselves, but the right manager might be able to help them get it done. Therefore, the artist and manager relationship is a partnership, similar to the emotional commitment of a marriage, based on trust, for the purpose of achieving business goals (making money) that each could not have attained without the other.

Power of Attorney

Artist managers bring order to the daily chaos caused by success in the music, film, and entertainment industry. Personal managers legally represent artists through a power-of-attorney agreement. It provides personal managers with the legal privilege and obligation of controlling the business and career decisions of the artist. What is really taking place is the personal manager recommends someone to the artist to hire for their management team. Booking agents, tour or road managers, business managers, and approval of SAG-AFTRA talent agents are examples. One of the mistakes beginning acts make is signing a manager who is also their attorney, agent (nonunion), business manager, and personal manager. Putting all those tasks on one person is not very wise if you’re serious about a successful career; if they happen to turn out to be a bad guy, you may still be signed to them for all these duties for years. That means you’re really stuck and can’t hire others until you gain a release from the bad dude. Also, make sure your power-of-attorney agreement is limited to specific financial matters tied to your career business duties, not personal or investment funds.

Thus, a limited power-of-attorney agreement permits the manager to lawfully represent (to the very best of his or her ability) the artist(s) in either specific or all business decisions (depending on how much the artist wants to remain involved in daily decisions). Other duties include record label agreements, music publishing, music producer selections, mass media promotion and publicity through a hired or label publicist, concert appearances supervised by the road manager and arranged by a talent agent through a concert promoter, merchandising, corporate sponsorship, endorsements, charity, and community service. However, guess who is responsible to pay their salaries?

Commission Base

Managers are typically paid 15%–20% of an artist’s gross income, including record deals (after recoupment), concert tours, merchandise, and corporate sponsorships. The standard is 15% for single artist representation and 20% for groups or bands. However, the rates may be more or less depending on what is negotiated based on precedent, reputation, and the type of genre (rock managers are often paid 5%–10% more, Christian acts are sometimes paid less, and hip-hop and rap acts’ managers are paid whatever they can get). Elvis’s manager, Col. Parker, made 50% of everything, which most people in the industry thought was crazy), and sadly when Elvis passed away, he had only a couple of million in his accounts.

Gross vs. Net

Management payment rates are based on the gross income of all or part of whatever the act earns. This too is negotiable, but the more powerful the manager, the less likely it is that they are going to negotiate down the percentage of what they are paid or which types of incomes they are to be paid on. In addition, most managers will not agree to work for net, which is the amount of money an act is paid after all expenses (touring, recording, agent fees, taxes, etc.) are deducted. Also, the manager’s typical business expenses (in the name of the artist) are paid out of the artist’s gross income, not by the manager. Business office expenses, travel, payments to business managers, road managers, and booking agents, who are hired by the manager in the name of the artist (remember the power of attorney), are paid by the artist, not the manager.

Business Managers

Business managers are the financial experts who provide the accounting, tax planning, and investment advice for the acts. In good management situations all the money earned by the act goes first to the business manager, who then pays everyone. By putting the business manager in charge of the money, it is easier to control the accounting, taxes, and long-term investments for the act. Business managers should be paid a flat or hourly rate for the amount of work they accomplish and for the success of their financial investments. Some are paid a small percentage of the gross income (5%), but this is rarely in the artist’s best interest. It is desirable for a business manager to have a degree in finance, plus a successful track record in investments and money market funds and experience with industry professionals.

Tour or Road Managers

Road managers are responsible for all the daily business decisions dealing with concerts and personal appearances on tour. As a result, road managers handle the local press as well as questions and concerns from promoters, local radio stations, and record retail promotions. In addition, they make hotel and restaurant reservations and handle any issues of concern among the recording artist(s), band members, roadies, and tour support. Road managers report directly to the artist and personal manager, and they are the local communication link between the artist, the promoter, and the manager of the venue. Great road managers often use the road and concert tours for networking, in hopes of starting their own artist management company later.

Booking Agents

Booking agents commissioned by the AFM represent musicians employed as recording artists, session musicians, and concert performers. Equity union–licensed agents represent actors and performers pursuing employment in any type of unionized live theater. SAG-AFTRA approves of agents who represent their members seeking employment as vocalists in recording sessions and as newscasters and TV personalities. The Screen Actors Guild (SAG) represents actors and performers in any type of film and visual media (as opposed to video, which is covered by SAG-AFTRA).

Union-franchised booking agents are ordinarily limited to 10% commission rates, although some may charge more. The unions, of course, bring the power of collective bargaining and legally supported contracts to encourage businesses that hire union musicians, vocalists, actors, and others to fulfill their financial and contractual obligations as originally stated in the deal. The agent holding the license commissioned by the AFM or SAG-AFTRA may employ subagents. They are paid 25%–50% of the 10% gross income the acts receive when “booked” and paid to perform. Film agents franchised by SAG-AFTRA represent acts to be hired by producers, film companies, and, of course, directors (who are the real power behind visual media productions). Royalty artists, vocalists, musicians, and bands are represented by AFM (musicians) and SAG-AFTRA (vocalists) to bar owners, restaurants, venues, and concert promoters, who create, promote, and sometimes profit from concert events and tours.

Attorneys

Managers hire attorneys to structure deals for artist tours, merchandise sales (through fulfillment companies), corporate sponsorships, label deals, appearances, and any other type of business opportunity. Accordingly, some attorneys become very powerful and can act as personal managers after they have established themselves in the business. Attorneys charge hourly rates ($250–$1,000 per hour) or are placed on a retainer, which is a monthly minimum fee based on a negotiated number of hours of work per month or part of the artist’s gross income. It is preferable to pay an attorney’s hourly rate (as opposed to a retainer fee) to guarantee the productivity of the attorney.

Artist Management Promotion

In the past, radio station airplay was the most important type of exposure for new artists and their recordings. In addition, radio acted as a natural filter to expose only the potentially successful artists and recordings. However, large corporations, such as Clear Channel (which owns close to 10% of all the radio stations in the United States), have made it very difficult to break new acts on radio.

Also, Generation Y (the current 18–24-year-old consumers) has changed the rules of the game by not reading newspapers, watching TV, or listening to radio. Instead, they download their music and listen to what they want when they want it through their computers, iPods, devices, and cell phones. Artist managers and promoters are in the same situation as labels, struggling to find ways to make consumers pay for recordings or at least steal them, attempting to find better ways to exploit their acts and concert events through social networks and consumer technology.

Artist Management Publicity

Artist managers, record labels, professional musicians, and event specialists hire publicists from public relations firms as part-time or full-time employees to plant stories and articles featuring their clients (the artist) in the professional trades and social and consumer mass media. The publicist assimilates images that have been created, molded, or enhanced by the artist’s manager and label representatives into stories, news articles, and press releases. Branding is built out of the image, which is the foundation of the emotional connection between an act and consumers. Publicists alert the media to cover the events (which are often created by the management and label representatives) as news or entertainment stories. The stories are then released to the print and mass media with the hope of stimulating a positive correlation between the artist’s name and public perceptions. Increase in the public’s awareness of an artist and acknowledgment of an artist’s creative talents often turn into profits.

The Cost of Doing Business

The big surprise for many bands is the cost of everything when launching your business as a live performance show.

A public relations campaign, which is usually provided by a hired publicist, is the process or act of providing material (stories, press releases, etc.) to the social and mass media in an attempt to provide a favorable public image for an artist. The process occurs whenever there is contact with the public or whenever an act has some counter- or bad publicity. Positive aspects of the act are provided to spin the truth or to let consumers choose for themselves what they want to believe about an artist. Bad publicity or negative news can hinder record and ticket sales, so management will often provide the artist’s best side to enhance the artist’s image with the public.

Courtney Love

Let’s compare the artist’s and the labels and managers’ perspectives on the industry to see where the disconnect between perception and realities might start. Courtney Love’s comments are typical, and as you can imagine these types of comments drive label executives and managers a little crazy. According to Kurt Cobain’s widow,

Ms. Love is a smart woman who is frustrated by the typical business processes within the music industry. Let’s look at both sides of the industry from an artist’s perspective and the industry label’s and managers’ perspective. Honestly, this kind of stuff happens all the time and it’s frustrating to everyone. What would it be like to be her manager, trying to explain this stuff to her?

Ms. Love was ahead of industry trends, as she wanted a closer, direct, honest connection with her fan base. Now labels (in most cases) won’t even consider giving a new act a shot without an established, strong, growing, strong fan base that can be monetized. Being on social media or having a “presence” on iTunes, YouTube, and all the other sites is meaningless until the buzz generated is real and reflected in serious numbers (millions). Where was she correct in her statement and where does it appear that she may not have been informed or may have misread (which is easy to do) her contracts? The issues in her statement are very common as what attorneys often say is not what the signing acts appear to actually hear.

Recording Budget Mistakes

According to Ms. Love,

Spending that much money on an album is crazy. In today’s world anything over $200,000 is questionable. Most major acts and bands do not use the “band members” to record the album. Remember the Wrecking Crew? They use professional AFM studio musicians who will quickly record the tracks quicker, better, and of a higher professional musical quality. That could save at least $200,000–$300,000 in production expenses and the final album usually sounds better.

Manager Commission Mistakes

It’s a mistake to pay the manager on a recording deal even if he or she helped get the deal. The label is not providing the money for her to party, but to help her launch her career with touring, promotion, publicity, and so forth. This attorney must have taken commission on the $500,000 remaining after the band blew $200,000–$300,000 on the master recordings. If the guy indeed gave her bad advice, she paid him for it!

Defining the Advance Mistakes

From her first sentence it appears that she was misinformed about the term “advance.” Advances are monies that are paid directly to the act for their living expenses, during the recordings and to (sometimes) help them start generating income on the road. Half of that million went (sadly) to the master tape recording, which is to be paid back out of the album sales by the label to the account with her name on it at the label. She never sees it, as most label executives never give that much money to an artist, as they tend to blow it. The label is putting up a million dollars and giving her a great royalty rate of 20 points (percent of the suggest retail list price) once the bills have been recouped. If the label fails to recoup all its money (that it spent on her) how much does she owe them? Zip! On the other hand, if they were crazy enough to give her the million, then Courtney Love should have owned the master tapes as she paid for them out of her money (property rights). Then the label would have to pay her on every album sold and the deal would be more of a master lease, independent record (her own label) distribution deal.

Retainer and Overpayment Mistakes

They started with a million and then paid half a million dollars for the master recording. The manager “claimed” 20% on the remaining half a million, which reduced the amount remaining to $400,000. They’ve spent $600,000 and have a finished album nobody’s ever heard (no promotion or publicity yet budgeted) and a happy manager who made a phone call for $100,000. I am only kidding about the one phone call, but still he or she didn’t do much for the commission. Then it appears that each band member (four) paid for their own attorney and business manager $25,000 for a total of $100,000. But Ms. Love claims they have $350,000 left instead of what should have been a remaining $300,000 ($400,000 minus $25,000 times 4 members = -$100,000). It seems they lost $50,000 somewhere or maybe they had one attorney and one business manager and they paid each $25,000. Whatever! It is still a loss somewhere close to $50,000.

This points to two other languages tied to commonsense problems that often happen when there’s lots of money in a deal. Attorneys may demand a retainer, which means they are being paid to represent the act if they don’t have to do any work. As an example, let’s say you pay an attorney $25,000 on a retainer and then they work about ten hours over the next year, looking at contacts. Were they really worth $2,500 per hour? My suggestion is always hire attorneys on an hourly basis, which will end up costing thousands less. I like getting paid for doing nothing and if anyone knows where I can get that job, please let me know. However, famous and industry-connected attorneys often demand the front money before they agree to represent the acts. Are they really worth it?

Stardom and Taxes

It appears she either included herself as part of the band or was considered part of the band. She may even be really talented, yet the guys in the band should have been just hired musicians working for her corporation. Why didn’t her attorney set her up in a legal form of business that would have protected her and her name and estate, and given her control of the money and assets generated? A good example of a better way to do this is Hayley Williams and her group Paramore. Remember that Paramore is Hayley Williams and the band members work for her. The fans don’t know it and that’s fine, and besides they don’t care.

Most of us forget about Uncle Sam until April 15, but when you’re an artist or entrepreneur, then you’ll often have to pay on a quarterly basis. Paying the taxes up front is the only way to do it and remain somewhat sane. But now we’re down to what’s left, which is only $180,000 divided into $45,000 each. Wow, how depressing is that!

Failure to Plan Ahead

The record label’s executives usually make the decision about which of the album cuts will be released, not the band. What does the band know about the market? How is the band going to get the singles on the radio and who going to inform the trade magazines? It’s either the band manager working with the label, together making up the marketing play and budget, or it’s the band on its own. It would be very rare for a band to be given $1 million and then be allowed to make business decisions about how to spend the money and how to profit. Most entertainers don’t know or have the ability to do either.

Music Video Budget Mistakes

Most videos currently are budgeted $20,000 to $100,000, with the label paying half and the artist paying the other half. Courtney and her band do not have $500,000; they’ve got only $45,000 to live on. So where’s the money going to come from? The answer is the label, and it will just increase the artist account debt by $500,000 and pay the other half a million out of its own pockets.

Promotion and Publicity Expenses

If a label ran the independent radio promotion through tour support, then their 50% of payment (usually stated in the original deal) is dropped and the entire amount for promotion and publicity becomes 100% recoupable out of the band’s royalties. About half a million for promotion and publicity is typical for labels to spend on a two- to four-week campaign to determine if the act is going to hit or fail. The label executives (and Love’s manager) will be looking at detailed album sales and single radio station airplay from Billboard charts, Nielsen SoundScan reports, and other sources to determine if anything is happening.

The Biggest Mistake

This is the biggest mistake almost all recording artists make. Ms. Love claims the band owes $2 million to the record label. Is this correct? No, she and her band owe nothing! It’s the label’s obligation to sell enough products (recordings) and now in a 360 deal (recordings, merchandise, corporate sponsorships, and concert tickets) to repay their own debt they created in the artist name. What’s she got to complain about? The label isn’t demanding the money back from her bank accounts. They have to pay (her loan as she calls it) back themselves. I do not know of any banks that would do that for you or me, but if you find one, let me know.

Zip

The record labels structure their deals with recording artists to favor them instead of the act in this highly financially risky industry. It takes millions to create the products, promote, provide publicity and distribution, and make a potential profit. Thus, most of the deals are skewed toward the label on a 1 to 3 or 1 to 4 ratio, meaning the labels will break even and start making a profit before the artists. Why not—it’s the label’s money up front. Thus, a label may have to sell 150,000–200,000 albums before it breaks even and 500,000+ units before the act starts receiving their royalties. This was the way it was back in the pre–360 deal days, but as we now know, it is even more difficult for labels to make a profit, as album sales are in the toilet.

It’s a funny thing, but if you let people take money from you, they often will and it’s her job to make sure it didn’t happen. She probably trusted her attorney, who may or may not be working in her best interest. Let’s look at the rest of the story.

The Label’s Perspective

Labels usually want a long-term agreement with artists, who provide the label and themselves with profits. However, if the act signs a deal heavily skewed toward the label, its (the label’s) risk of doing business is reduced and that’s what Ms. Love may have been encouraged to do without really understanding what was in the deal. It happens all the time, as some new acts do not even read the deals before signing them. Major label deals are more complex than buying a new home and the paperwork can easily be more than 100 pages.

Ms. Love claims they made zero and the label made $11 million gross and $6.6 million in profits. How could this happen? It’s in the details of the deal. She claims they spent half a million on pressing CDs, plus the other expenses she already mentioned in her statement. In addition, she claims the label spent $2.2 million on marketing and thus the total spent by the label was $4.4 million while the band made zero.² If Ms. Love’s management had told her that most artists do not make any serious money from the record deal, but they can make millions touring, selling merchandise, and making endorsements, because the label had made them famous, it might have been a different story. She also claims the label’s music publishing company paid $750,000 in music publishing royalties, yet we do not know what type of single-song contract she signed.³

Analysis of 360 Deals

Artists about to sign a deal should understand what Ms. Love and so many of the other famous recording artists have had to find out the hard way. It’s a foundation that leads us to understanding the purpose of the 360 deal concept. If labels can’t make enough money from their album sales to profit, then they’ve got to find another way. Follow the money and you’ll discover that all the merchandise, corporate sponsorships, and touring-generated revenues were 100% the artist’s under the old traditional recoupment deals. If an artist were about to hit the big time, they’d use the fame they’d received from the label’s investment in album sales and profit (from the touring, merch, and other revenues) even if they never made any money from their record deals. I have had more than one conversation with famous major recording stars who tell me they never made a dime from their recording deals.

However, we do not stand still in a constantly moving universe. The breakthroughs in digital technology have provided many opportunities for consumers to listen to their favorite tracks and even watch movies anytime, anyplace, anywhere, and usually for free if they want to tolerate the advertisements or steal the entertainment products. How are these amazing entertainment companies going to make a profit on their investments (which we already know is risky) if they are not paid for the sale or use of their recordings?

The Solution

The answer is simple as labels, movie companies, creative artists, musicians, writers, and others must be paid (reasonable profits and wages) or the industry will simply dry up. It’s the development of a new workable business model (that generates revenues while still producing great entertainment products acquired for free) that is really difficult. But everyone is working on it and hopefully things will start to shake out. Otherwise, what we’ll have is a world full of old products and new ones that appear to not be at a very good level of quality from all the computer whiz wannabes.

Here again, we see the 360-deal business model allows us to still have major recording artists and listen to their music. However, the playing field has been shifted from album sales to touring and other sources. Of course, the superstars who were making millions and keeping it all are upset when they have to start “sharing” a percentage with their labels. That’s why a few of them have already started their own labels (and hired the former executives to run them) and paid out of their own pockets the millions to create albums, promotion, publicity, and other expenses. They have become their own labels just as they used to be their own businesses, putting on shows and selling endorsements and merchandise. However, many have found out that it is financially riskier and more work than they’d ever believed. They sign distribution deals with one of the three major labels and then have to hire experts to make it all happen.

Honesty is the best policy, and full disclosure about the business of entertainment and the risk, costs, and potential rewards should be clearly explained before acts sign any deals. Management must make sure this will happen if there is to be trust between the two, which of course is what the artist/management deal is founded on.

Stage Names

Artists often pick a stage name (other than their actual birth name) to perform or create an image and to support their brand. There are valid reasons to adopt a stage name, including privacy issues and an opportunity to live under your real name and perform under your stage name.⁴

Table 11.4 Stage Names. Most famous artists don’t perform using their given names. Enjoy Table 11.4. There are lots of issues, including taxes and privacy issues. Take a look at the major entertainment industry personality and check out their real names. Then try to figure out a workable “stage name” for yourself if you were to become a “public” personality.

Real Name	Stage Name	Real Name	Stage Name
Stefani Joanne Angelina Germanotta	Lady Gaga	Born Steveland Hardaway Judkins; later renamed Steveland Hardaway Morris	Stevie Wonder
Ray Charles Robinson	Ray Charles	Anthony Dominick Benedetto	Tony Bennett
Tracy Morrow	Ice-T	Katheryn Elizabeth Hudson	Katy Perry
Calvin Cordozar Broadus Jr.	Snoop Dogg	Beyoncé Giselle Knowles	Beyoncé
Selena Quintanilla-Perez	Selena	Christina Claire Ciminella	Wynonna Judd
Marshall Bruce Mathers III	Eminem	Madonna Louise Veronica Ciccone	Madonna
Ernest Evans	Chubby Checker	Richard Starkey	Ringo Starr
Eleanora Fagan Gough	Billie Holliday	Lester Polfus	Les Paul
Curtis Jackson	50 Cent	Wladziu Lee Valentino	Liberace
John Francis Bongiovi, Jr.	Jon Bon Jovi	Carlos Ray	Chuck Norris
Alecia Moore	Pink	Frank Castelluccio	Frankie Valli
John Anthony Gillis	Jack White (White Stripes)	Farrokh Bulsara	Freddie Mercury
Reginald Kenneth Dwight	Elton John	Steven Victor Tallarico	Steven Tyler
Gordon Matthew Thomas Sumner	Sting	Dino Paul Crocetti	Dean Martin
Victoria Caroline Adams [Beckham]	Posh Spice (Spice Girls)	Marvin Lee Aday	Meat Loaf

Source: “Music Stars Real Names.” DigitalDreamDoor.com. January 28, 2015. Accessed November 21, 2015. http://www.digitaldreamdoor.com/pages/realname.html.

Social Media and Press Kits

Press kits, discussed in Chapter 9, help establish the authenticity of new and established artists. Publicists assemble press kits to alert the press and mass media of new recordings, acts, and newsworthy events. A press kit usually includes a black-and-white photograph (publicity photo), a one-page bio of demographic information, artistic and creative accomplishments, and copies of previous press releases to the trade and consumer press. Managers work with the label’s promotion and publicity executives to provide a common image and brand.

Personal managers also use broadcast radio and television to market their acts. Variety, late-night, and morning talk shows promote artists and their sellable products. Publicists are again hired to help “place” stories about the artists in the trade and consumer press. They also help generate interest in the artists’ backstories (about their brand, life, image), which is publicity that can be used by the labels also on a television variety/talk show. Appearances on popular TV shows reinforce the status of the act and inform the public of new recordings being released, tour dates, and other opportunities.

Star Factor Publicity Budget

The amount of money management spends (it’s the act’s money) varies depending on the status or success of the act and cooperation with the label. The artist manager commonly meets with label representatives to coordinate publicity. Budgets to be spent on publicity often depend on the star factor (name and image equal the strength of the artist based on past units sold, total revenue generated, and sales projections). At first the money is 50% label and 50% artist, yet many new acts can’t contribute their 50%, so the label pays 100% and then claims it as a tour advance in order for it to be noted in the artist account at the label as 100% recoupable.

Talent Agents

Talent agents own or work for agencies licensed by the unions to represent creative artists. They may provide some career advice and guidance just as personal managers do in the music business, but their main job is to seek and acquire employment for their acts. However, in today’s music world the talent agent’s job descriptions are blending with some of the personal manager’s. Usually, an artist’s manager hires AFM licensed booking agents to set up tours for acts. However, talent agents working at the major agencies (CAA, ICM, UTA, and WME) also establish tours and provide some management advice to representative artists. SAG-AFTRA and the AFM are unions, while CAA, ICM, UTA, and WME are talent agencies or businesses licensed by the unions to represent the union members (creative artists) by seeking employment opportunities (casting calls for film, tour for musical acts, speaker engagement for personalities). Talent agents may seek many entertainment-based employment opportunities (e.g., endorsements, acting, commercials) for the creative acts they represent, while AFM booking agents are usually limited to musical tours and other types of musical performances. Thus, SAG-AFTRA and Equity talent agents have the same title as talent agents at CAA, ICM, UTA, and WME, but their duties and responsibilities are somewhat limited by the unions their clients represent. Some SAG-AFTRA and Equity agents also provide advice and guidance similar to music business personal managers on a limited basis.

Talent Agencies

Talent agencies control entertainment promotion, publicity, and employment opportunities for many of the most famous acts, authors, public personalities, and artists. They frequently represent the superstars of music and films for productions, tours, appearances, advertisements, and any other types of events or work that benefits the iconic images of the artists. They provide worldwide representation and, in doing so, provide talent to world markets. The four largest talent agencies, known in the industry by their acronyms, are identified and discussed ahead by their distinctive market brands. These are CAA, ICM, UTA, and WME.

Creative Artists Agency (CAA)

CAA was formed in 1975 and is noted for its powerful list of actors and entertainment personalities, including famous directors, sports, business, and celebrity motivational speakers. CAA has about 1,200 employees, with annual sales grosses at about $80 million. According to Answers.com and Hoover’s Company Profile, CAA

International Creative Management (ICM)

ICM was formed in 1975 by the merger of Creative Management Associates and the International Famous Agency. According to Hoovers, ICM

United Talent Agency (UTA)

UTA represents major stars and the behind-the-scenes creative artists in the entertainment industry who make the entertainment products we love to watch. According to Hoovers (2015),

UTA also represents many of the behind-the-scenes workers in the film and production business. According to unitedtalent.com (2015),

William Morris Endeavor Entertainment (WME)

WME takes a different niche, as it represents talent, public personalities (speakers), and authors. It was formed in 1898 to represent vaudeville acts and currently has offices in New York, Beverly Hills, Nashville, London, Miami Beach, and Shanghai. According to Bloombergbusinessweek.com (2015), WME

All of the talent agencies have slightly different business models, as CAA represents many superstar movie and recording musicians. The others do the same, except UTA also represents the movie production teams and financing options for investors. Now that you’ve grasped the big picture of representation, let’s take a look at how representation works with promotion companies and entrepreneurial promoters to create events.

At this point, you have whole picture of how you can be an active and important part of the entertainment and music industry. If you have stuck with me this far, you know that having talent is one thing, and being an intelligent and creative entrepreneur is another, though not unrelated, essential aspect of your future career. You have digested the basics of the all-important copyright law, and my discussion of the implications of digital transformations and innovations, such as streaming, deliberately taking a negative cast, has been to alert you to, without preaching to you, of the dangers of not paying attention to the changes all around you. You have also become acquainted with the many professionals and their functions in discovering, promoting, and sustaining artists and entertainment genres. Also, importantly, you have seen how to calculate costs to manage risks from both the artists’ and the label’s, studio’s, and network’s perspectives and how to take your show on the road. Let’s make some money!