Management Agreements Explained: Contracts, Commissions

Audience: Artist Managers and Artists | Read time: 12 min

A management agreement is a contract that defines your manager's commission (typically 15 to 20 percent of gross income), responsibilities, term length, and what happens after the relationship ends. Before signing, understand four critical elements: which income streams are commissionable, how the sunset clause works, what the key person provision protects, and which red flags signal problematic terms.

The management relationship is the most important business partnership in a music career. Your manager coordinates your entire team, negotiates deals on your behalf, and shapes your long-term strategy. According to industry data, the industry average for a manager's commission hovers around 15 percent of the artist's gross revenue, though this can shift based on career level and needs. A well-structured agreement creates a partner invested in your success. A poorly negotiated contract creates years of financial obligations and potential legal disputes.

This guide explains every component of management agreements so both artists and managers can build fair, transparent partnerships.

A management agreement is a legally binding contract outlining the relationship between an artist and their personal manager. It specifies what services the manager provides, how they get paid, how long the relationship lasts, and what happens when it ends.

Unlike informal handshake deals, written agreements protect both parties by clarifying expectations before money and opportunities arrive. Choosing a manager is one of the most, if not the most, important decisions that an artist makes in their career. The contract should reflect that significance.

Every management agreement should address these core elements: term length (how long the agreement lasts), services scope (what the manager will do), commission rate (what percentage of income they receive), commission base (which income streams are commissionable), and sunset clause (what happens after termination).

Commission is the financial engine of the management relationship. When the artist earns money, the manager earns a percentage. This structure aligns incentives because the manager only succeeds when the artist succeeds.

Standard artist manager commission rates fall between 15 and 20 percent of the artist's gross income. Several factors influence where you land within that range.

Some managers use variable rate structures. For instance, 10 percent on income up to $100,000, 15 percent on income up to $500,000, and 20 percent above that threshold.

Understanding the commission base is as important as understanding the rate itself.

Gross income is the total amount earned before any deductions. A manager taking 20 percent of gross receives their commission before expenses, taxes, or other fees are subtracted.

Net income is what remains after deducting associated expenses and fees. A 20 percent commission on net income produces a smaller payment than 20 percent of gross.

Most managers commission gross income because it produces a larger payment. However, many agreements specify a modified gross basis that allows certain standard deductions before calculating commission. These deductions often include recording budgets, touring support funds, and payments to co-writers or producers.

Standard management agreements commission income from recording royalties (sales, streaming, and licensing), touring and live performance income, merchandise sales, endorsements and sponsorships, and sync licensing fees.

However, not all income should necessarily be commissionable. Common exclusions negotiated by artists include songwriting and publishing royalties (often excluded entirely or subject to a reduced rate), session musician work (playing on other artists' recordings), producer fees (if you produce for other artists), acting income (if applicable), and income from pre-existing deals negotiated before the management relationship began.

If the scope of services is limited to the music industry, you should make sure there are no other issues which may need to be considered. For instance, if you have a part-time administrative job at a recording studio or provide music lessons, you should likely carve out any commissionable income in these areas.

A sunset clause is one of the most negotiated provisions in any management agreement. It determines how long a manager continues earning commission after the relationship ends.

The purpose of this clause is for the benefit of the manager, to protect them from putting in a lot of work on certain projects, only to have the term end and not earn any commissions from those projects in which the manager invested a lot of time, effort, and possibly money.

If a manager spends two years building relationships that result in a major record deal, they deserve compensation when that deal generates income, even if the management relationship ends before the album releases.

A sunset clause reduces the percentage commission the manager is entitled to down to zero, typically over a three to five year period after the contract term ends.

A typical sunset provision uses a de-escalation schedule. For example, with a 20 percent in-term commission:

Scope: Sunset commissions should apply only to deals negotiated or substantially developed during the management term, not to new opportunities that arise afterward.

Duration: Artists should push for shorter sunset periods (12 to 24 months), while managers typically seek longer periods (3 to 5 years).

Rate reduction: Negotiate for meaningful percentage reductions each year rather than flat rates that persist for years.

New management consideration: If you hire a new manager during the sunset period, you may be paying two management commissions simultaneously. Factor this into negotiations. A sunset clause that persists at high rates creates significant financial burden when combined with a new manager's commission.

A key person clause protects you when you sign with a management company because of a specific individual. If that person leaves the company, you can exit the agreement rather than being assigned to someone you never chose.

The clause identifies the specific individual whose involvement is essential to the agreement. If that person leaves the management company, becomes unavailable, or stops actively managing your career, you gain the right to terminate the contract.

Without this provision, a management company could assign your account to any staff member, even someone with no experience in your genre or no existing relationship with you.

Key person provisions are essential when signing with a large management company or agency where multiple managers handle different artists, when the manager who pitched you has a strong personal network that attracted you to the deal, when the manager's specific expertise (genre knowledge, label relationships, booking connections) motivated the partnership, and when the management company has experienced recent turnover or instability.

Term length determines how long you are contractually bound to your manager. This provision significantly impacts your flexibility and the manager's investment incentive.

Industry standard ranges from one to three years, often with renewal options tied to performance milestones.

Many agreements include option periods allowing the manager to extend the contract if certain conditions are met. Artists should ensure these options are tied to measurable performance benchmarks rather than being automatic renewals at the manager's discretion.

Performance triggers might include minimum income thresholds, specific deal closures (record deal, publishing deal, booking agency), or documented career advancement (venue size progression, streaming milestones, chart positions).

Beyond term length, understand what conditions allow either party to terminate the agreement early. Common termination triggers include material breach of contract terms, failure to meet performance benchmarks, extended periods of inactivity, and mutual agreement to part ways.

Not all management agreements are created equal. Some contain provisions that create significant long-term problems.

Commission on ALL income without exclusions: If the agreement commissions every dollar you earn with no carve-outs for publishing, session work, or teaching, negotiate exclusions before signing.

Commission on gross with no defined deductions: Ensure the agreement specifies what standard deductions apply before commission calculation.

Commission rates above 25 percent: While some experienced managers charge 25 percent for comprehensive services, rates beyond this threshold require exceptional justification.

Terms longer than 3 years without performance requirements: Long commitments should include measurable benchmarks that allow you to exit if the manager underperforms.

No sunset clause or sunset periods exceeding 3 years: Sunset provisions should decrease commission over time and eventually end. Perpetual or excessively long sunset periods create ongoing obligations that may outlast the value the manager provided.

Automatic renewal without performance conditions: Option periods should require demonstrated results, not just passage of time.

Manager controlling your bank accounts or finances: Personal managers should not have direct access to your money. A business manager or accountant handles finances; a personal manager coordinates strategy and opportunities.

Power of attorney without limitations: If the agreement grants power of attorney, ensure it specifies exactly what documents the manager can sign on your behalf and includes limitations on financial commitments.

Ownership claims on your name, brand, or creative works: Managers should not own any portion of your intellectual property, artist name, or brand assets. These belong to you regardless of who helped develop them.

Vague or undefined responsibilities: The agreement should clearly specify what services the manager provides, not rely on general language about "career development."

No communication or reporting requirements: Establish expectations for regular updates, meetings, and financial reporting.

Hiring an experienced entertainment lawyer is one of the single most important investments you will ever make in your career. An entertainment lawyer knows industry-standard commission rates. They can spot hidden dangers in a poorly worded sunset clause and know exactly how to protect your creative control.
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Entertainment lawyers typically charge $300 to $600 per hour for contract review. A comprehensive management agreement review might cost $1,000 to $3,000. This investment protects you from provisions that could cost tens of thousands of dollars over the contract term.

Both artist and manager should have separate legal representation to avoid conflicts of interest.

Before signing, contact at least three current or former clients of the manager. Verify claims about industry relationships and deal-making track record. Check for any legal disputes or ethical issues. Assess the manager's current roster size and attention capacity. Evaluate their financial stability and business practices.

Ensure you understand exactly what constitutes gross income for commission purposes, which expenses are deducted before commission calculation, what specific services the manager will provide, how disputes will be resolved (mediation, arbitration, litigation), and what happens to ongoing projects if the relationship ends.

For emerging artists, 15 to 20 percent of gross income is standard. New artists represent higher risk and typically require more intensive work from managers, which justifies rates at the higher end of the range. As your career develops and income increases, you may have leverage to negotiate lower rates.

Yes. Songwriting and publishing royalties are commonly excluded from management commissions or subject to reduced rates (often 10 percent instead of 15 to 20 percent). The rationale is that publishing income flows from your creative work rather than business activities the manager facilitates.

Establish measurable performance benchmarks at the outset. These might include booking a certain number of shows per quarter, securing meetings with specific industry contacts, achieving streaming or social media growth targets, or closing specific deals within defined timeframes. Without benchmarks, "underperformance" becomes subjective and difficult to prove.

Review your termination provisions. Most agreements require specific conditions for early termination, such as material breach or failure to meet performance benchmarks. Leaving without contractual grounds may expose you to legal claims for unpaid commissions through the remainder of the term plus the sunset period.

Absolutely. Vague language about "career guidance" creates ambiguity about what you can expect. List specific responsibilities: deal negotiation, team coordination, strategic planning, financial oversight, creative feedback, and any other services you expect the manager to provide.