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First of all, talent should never pay up front for representation. An agent or a manager should never ask for money upfront from the talent. Agreements that require advance payment by the talent or provide some form of guarantee of employment or otherwise - these are typically illegal. Talent managers and agents only work on commission. This means the manager is paid a percentage of what the talent makes.
The talent does not pay the management company directly. Instead, managers are paid a percentage of the talent’s “gross compensation,” as that term is defined within the management agreement. Managers normally earn between 10 to 25 percent of the talent’s gross income.
The management agreement will also encompass as many entertainment-related activities for as long as possible. From the management company’s perspective, this allows for the highest possible return on the management company’s investment of time and resources. In contrast, the talent may want to limit the scope of the industry-related activities or time period encompassed by the management agreement. Most reputable management companies may be willing to negotiate the terms of the contract with the talent so that a suitable “meeting of the minds” between the manager and the talent is achieved.
The manager’s percentage fee also vary within the different entertainment fields. In the music industry, the manager’s percentage is typically in the range of 15 to 20 percent, but it can be lower or higher. In regards to actors and actresses, personal managers occasionally ask for upward of 15 percent. If the actor or actress has both a manager and an agent, the standard management fee will typically be limited to 10 percent.
In addition, if the talent becomes big enough and in demand, the talent may require the personal services of an experienced entertainment attorney to review contracts and work on big deals for the client. The attorney fee typically will be an additional 5 percent of the talent’s gross earnings. For other talent that are not so in demand for which regular revenue can pay continuous legal services, hourly or fixed fees are often charged to review and draft entertainment contracts.
The manager may be entitled to receive a percentage of the gross earnings collected by the talent even after the expiration of the management contract term. This is because, oftentimes deals are substantially negotiated or existing deals are extended during the term of the management agreement. This may include further income, residuals, royalties, or licensing fees. In this situation, it is the industry’s standard that the manager receive continued payments under those contracts that the management company provided substantial services. In certain situations, the management company may be willing to negotiate a reasonable cap to post-term payments. This is known as a “sunset clause”.
The management agreement will provide for authorization for the talent’s agency to pay the management company directly. The management agreement will also allow the manager to receive all monies payable to the talent. The management fees will then be withdrawn and the management company pays the talent. Any other commissions or fees that are owed by the talent will also be disbursed by the manager. The talent will then receive their net payment. This allows the talent to focus on their art and craft. Alternatively, if the talent insists that all money be filtered directly through them, an appointment of an independent third party business manager or a certified public accountant most likely will need to be used to collect the gross earnings and render all accountings and payments. This can be an expensive alternative. Even so, most reputable management companies should have a network of business managers and financial advisers that can handle paying the talent’s taxes, managing the talent’s money, and also advising the talent on investment opportunities. These type of business managers will then also usually receive an additional 5 percent fee for their services.
Practically speaking, the position of a manager is a position of trust. Most talent hire the manager for its professionalism and experience in the industry. The reputation of the management company is its cornerstone.
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