An Audio Masterclass reader asks an interesting question …
“Over the last year I have started a producer management company with a friend. It has taken a year to narrow it down to about five great producers. We have some eyebrows raised and are soon to be negotiating some major pop/hiphop/r&b placements. As a management team do we collect all royalties then pay our producers what is in their contract or do they pay us the percentage that we have agreed upon? I'm trying to figure out if the royalties come to us then we pay them.”
Firstly, let’s take it as given that your team is hot and so are your management skills. There WILL be money to share, and lots of it.
You are probably going to take a commission of 20% from your producer clients. They will see this as a good deal because they won’t have to look for work. You will do that. They won’t have to get involved with the messy business of extracting money out of record labels. You will do that.
So it just remains to determine how the money should flow.
Remember the old saying “Possession is nine tenths of the law”?
There may not be a lot of actual truth in this statement, but it certainly does illustrate an important rule of business…
You should make sure to get physical hold of money that is due to you ABSOLUTELY as soon as possible. You should NEVER, as far as possible, let anyone else hold money that is rightfully yours.
Another important rule of business is to pay people on time and in full. You will find that people are pleased to work with you if you always do this.
Unfortunately, in the real, dirty world of business there are many people who will pay you late, pay you very late, or not pay you at all. Indeed, some people think it’s clever to do that.
So from your point of view it makes no sense to allow individual producers to collect payments from record labels.
You can’t expect producers to have any skill in doing this, so inevitably some payments will be lost.
And then you have the hassle of getting money out of your producers.
No, without a doubt you should collect the money yourself, take your 20% or whatever percentage you decide. Then pay your producers.
And pay them promptly!
Note, in some states only a licensed agent can negotiate employment. In this case, the manager would have to work in conjunction with such an agent.