TH3RD BRAIN’s Jake Udell on Management Commissions [ OP-ED]

The following featured in Jake Udell’s Art of a Manager newsletter.

“Power has shifted in the music industry, and a large share of that power is resting with artist managers. Artist managers are the CEO’s of musicians, they are key to not only building equity in the artist’s brand but they also hold all of the artists’ investors accountable for delivering on their promises.” – Luke Girgis

I wouldn’t go as far as to says managers are always the CEO of an artist, but many other points in this article – It’s time artist managers got paid properly – are true.

At times, management can be analogous to building a house on somebody else’s property.

“Success and failure of a career did not fall exclusively on [management’s] shoulders as it does now…” 

Luke is correct. Times have changed. Artists have far more responsibility and control in marketing themselves than ever before – managers share in the execution and lead far more of these activities these they did in a pre-digital era.

“So this begs the question; managers have more influence, responsibility, are higher skilled and harder working than they have ever been in human history. Why are they paid the same rate, and in some cases less, than they have ever been paid?” 

It takes an army to break an artist – For rising or established artists, the management segment alone often requires multiple people. For our clients, we typically have a manager, in-house A&R, sync, digital/creative, and me. They may not all work full time for the artist, but they spend time to be across the artist’s activities and constantly pitch them for opportunities.

When acts are generating multi-million dollars a year, I actually think standard management fees are pretty fair (15-20% of gross income*).

However, as acts get bigger, they usually attempt to reduce commissions. In fact, I lost a client last year after they tried to reduce commissions for the second time in three years. I said no.

When an act is generating less than a million dollars a year, it’s almost impossible to sustain the level of services an artist needs from management commissions alone.

In fact, even the prospect of an artist’s success resulting in increased management commissions doesn’t always warrant the original investment.

Is there a business model as a manager for developing recording artists that works?

Unless an act happens to blow up over night, which is fewer and far between these days, I haven’t found one. Even if a management company is willing to to support managing developing artists by paying for it from the revenue they generate from other artists or activities, it still begs the question: is it a good business decision to develop recording artists?

Managers are entrepreneurs at heart. And entrepreneurs must be optimistically delusional in order to succeed.

Can trusting your gut instinct on an artist’s talent be more meaningful than fans expressing their support for a different artist? In 2019, I would say the answer is rarely.

I have always believed in developing artists and almost every act we have ever worked with, we started with from ground zero – In most cases, less than five songs even out. However, this business model alone isn’t sustainable for most companies as the article points out, which is why we started a record label.

Luke’s article’s consensus is that artists should allow their managers to get points on their masters or share in their publishing (especially early in the artist’s career), similar to how skilled and effective leaders joining tech companies get equity in those companies.

It’s an interesting concept, but since artists only have one career (unlike those in tech), giving up any aspect of their copyrights is a significant ask, unless the manager is investing in the project. If they’re putting in the work and investing, it’s a more substantial commitment… And at that point, I do believe copyright ownership is on the table.

While I don’t think a manager should be entitled to points on the songs or a share in publishing, I do believe very strongly in commission in perpetuity on term product (the ability to get paid commissions for life on revenue from songs released during the management term).

And arguably, if you’ve built the artist successfully from the ground up, you could be entitled to some earnings from their new works in the post-term as well.

Many lawyers are not comfortable with either of these clauses… But to put it in perspective, when you look at the rates other team members make for their work, do managers do a multiple of more work than the multiple of their income against theirs?

As the percentage paid to managers is not going to increase (nor can it sustainably for the artist to continue to grow their business), what other ways than commission in perpetuity** are there to compensate managers who are the driving forces alongside an act’s successes?

*I will acknowledge I am not a big fan of the gross structure from the artist perspective, but how many artists would rather pay 30-35% of net? So the structure stays.

**or at least an extended sunset, where a manager can continue to commission the songs they worked on for at least a period of time

This article originally appeared on The Industry Observer, which is now part of The Music Network.