Commission Rates
Commission rates have crept up over the years. There are sound reasons for this. Historically, the manager was nicknamed “Mr 10%”. By the 1970′s the most usual rate of commission was 15%. Nowadays, managers invariably charge 20%. Sometimes a manager will charge 25% although this is rarely thought to be justifiable.
An enhanced rate of this kind might arguably be reasonable in the case of a powerful and successful manager putting together a “manufactured” band and/or if the manager is prepared to work exclusively for the artist involved. The principal reason why rates have increased is that, whilst originally a lesser rate of perhaps 10% or 15% might have applied, the remaining terms of the typical management contract were more onerous from the artist’s perspective.
For example, the manager might have expected to receive his commission on the gross income arising from any contracts entered into during the currency of the management contract. The management contract might have run for five years but, for example, if towards the end of the five years the artist were to enter into a long term recording agreement the manager would nevertheless expect his commission on all earnings under that agreement (even though a large part of those earnings may be attributable to recordings made after the expiration of the management contract).
Nowadays, a manager would not usually expect to receive commission on recordings made or songs written after the expiration of the management contract (even though the manager may have negotiated the terms of the recording and publishing deals which 31govern those subsequent recordings and songs). Moreover, most managers now accept that commission will be calculated on the gross income only after deduction of certain expenses.
Also, the manager will often have to accept that following the end of the management contract there will at some point be a reduction or even a cut off in the commission entitlement. For these reasons, the rate of commission has increased to what is now generally 20%. The rate of commission may be affected by what is agreed with regard to the extent of the manager’s involvement. A manager may wish to limit his involvement to the business side of things and may not wish to be available day and night to deal with creative issues and personal crises.
If the manager is prepared to accept that he or she is offering something less than a full management service he or she may be prepared to accept a lesser rate of commission. A business manager will usually charge 5%. This will sometimes mean that the artist pays 25% in total but more often the general manager will accept 15%. On this basis, the artist may be better off because whilst he will still be paying 20% (15% to the general manager and 5% to the business manager) there may be a saving in accountancy fees.
In some cases, however, the business management services will be provided by the business management consultancy arm of an accountancy practice and whilst that consultancy will charge 5%, nevertheless an associated accountancy practice may still charge separately for bookkeeping and other accountancy services.
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