Return labels deals

Advances are often used to merely record the album.

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After the label has recouped the money they spent on an advance, you will get a portion of the royalties earned on your sound recordings. In the most basic sense, a label pays an artist an advance, works their album, gets a team behind the album, and tries to sell the album. In exchange the artist gives up a percentage of royalties. If you want to know more, do more research. Record deals come in many shapes and sizes and they can be quite confusing.

Here are some of the ways record labels big and small make money in the 21 st century. The rest goes to the retailer. Generally, the record label releases albums through a distributor. The money gets paid to the distributor, then to the label, and then to the artist in the form of royalties.

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Music publishing and licensing are increasingly important for labels and artists as sales decline and streaming pays less. So, if another artist covers your song and makes money off of it, you are entitled to royalties on that song. If a movie uses your song and pays you for it, the label will get a chunk of the money that you make on that licensing deal. Read our guide on Performing Rights Organizations for more info, and to learn about what PROs do, which one you should register with, and more.

All of this falls under publishing rights. Customized labels ready on the same day.

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Brand your mail and packages with custom mailing labels. Size: 4" x 1. Same Day Index Labels. The label, however, remains free to sign and promote as many artists as it wishes. Record labels invest huge sums of money in breaking an act and claim that they need this level of control in order to improve the chances of making a profit or, as is more often the case, to cut their losses. Occasionally the artist gets one over on the label. Mariah Carey described the termination of her long-term deal with EMI in , as "the right decision for me".

If an artist wants to make a guest appearance on another artist's record, they'll need a 'sideman' provision to cover this. Chris Martin, of Coldplay fame, recently showed up on the Nelly Furtado track 'All Good Things', albeit with his plaintive vocal somewhat obscured in the mix. Likewise, DJs and producers will sign deals under a specific alias, leaving them free to contract with other labels under a different pseudonym.

Major labels will normally sign the artist to a worldwide deal.

Split-territory deals are less likely with major record labels, but independents may be more willing to agree to such an arrangement. This relates to the duration of the contract. It is calculated by reference to an initial fixed period of maybe 12 months — when you'll make your first album — followed by further option periods, also usually of 12 months, allowing the record company to extend the contract if they wish. There will be a minimum commitment within each period, requiring you to deliver a certain number of tracks, to a releasable standard, with perhaps a total of five or six albums expected under the deal.

Try to avoid wording that masters must be 'commercially acceptable' — a euphemism for 'radio hit' — as delivery and acceptance requirements may have a knock-on effect on how long the artist is tied to the deal. Where a label is only willing to accept commercial recordings, as opposed to merely technically satisfactory ones, the artist may have to rework or re-record material before the label is finally satisfied of the record's chart potential. The option period in which the album is due could thus overrun by a good few months, before the label accepts it and commits to a release date.

It will be a further months before the label can determine the album's success, which in turn will delay the exercise of the next option, and so on. It is sensible therefore, to negotiate a 'long-stop' provision, so that the overall duration of your contract won't exceed six or seven years maximum. Under most exclusive recording contracts, the artist will assign copyright in the sound recordings to the record company. An assignment is a transfer of ownership for the full life of copyright.

In the case of sound recordings this will be 50 years from release. Having made a lot of money for his former label, Warner Music, but still not having access to the masters of his own material, Simply Red's Mick Hucknall turned his back on what he described as an 'immoral' deal, to go his own way with simplyred. Two issues are of particular concern here. Firstly, even unreleased recordings remain the property of the label for the artist's entire career.

And secondly, even once the artist has repaid all recording costs, the label will still own the masters.

Breakdown of artist funding

This was one of the reasons why Mick Hucknall decided to part company with Warner Music in early , claiming that his deal was 'immoral'. In rare instances, an artist will secure a reversion of copyright clause, allowing them the return of their masters at a future date. Robbie Williams' ground-breaking deal with EMI granted him such rights — but then again, how many Robbies are there?

Other rights the label will wish to acquire include rights in the album artwork and the right to use the artist's name and likeness in connection with the sale and promotion of the records. The artist should aim to secure a positive release commitment from the label at least in the UK , coupled with a minimum marketing spend to support the release. In this situation you might be glad you'd negotiated a key-man clause in your contract, allowing you to leave the label as well.

This would enable you to sign a new record deal elsewhere and avoid being left on the shelf. These are sums of money paid to the artist on account of future royalties. They're paid when the artist signs to the label, and again as and when further options are exercised. Robbie Williams, on the other hand, was able to use his considerable stature to swing a revolutionary deal that guarantees that his masters will eventually revert to him. More generous advances should be negotiated for the exercise of successive options — ie.

Recoupment is a process by which the label will first recover the advance against any artist royalty income. Care should be taken to remove any wording stating that an advance is repayable. This would have the effect of turning it into a personal debt, which you could be liable for at any time. You should only ever have to repay advances where your record sales generate sufficient royalties to cover them. Failing that, the label bears the loss. Remember, you'll probably have to split your advance with your manager and other members of your band if there are any , as well as with the taxman, who will also take his cut.

So even a generous advance can be eroded quite quickly. Advances are often provided as part of an inclusive recording fund. A certain amount will be allocated to the recording budget and any surplus goes into the pocket of the artist.

The full amount is recoupable, so avoid the temptation to go and blow it all on a lost weekend with Paris Hilton, as not only will you be left with nothing to live on, you'll have no record to release either! You must also make sure you only allow your manager commission on the non-recording portion of the fund — specifically, what's left over after the recording budget has been agreed.

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This is your personal advance, on which your manager will take his 20 percent. Although the thought of large advances may get you excited, they come at a price. Often, if the advance is large there'll be more pressure on an artist to succeed immediately. Then if the first record is a flop the label may cut its losses and simply 'drop' you. If you're after a little more stability and you truly believe in yourself, you should probably opt for a smaller advance and instead aim to secure a higher royalty rate.

Artists are paid royalties based on record sales.

Investing in music

Before they'll see any money, the artist will have to recoup the recording costs, advances, and usually 50 percent of all video costs. The label will make additional deductions, reducing the real royalty rate still further.

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Standard deductions — or standard as far as record labels are concerned — include a packaging deduction of 20 to 25 percent on CDs, a reduced royalty rate on foreign sales, budget records and record clubs, a reduced royalty on TV-advertised albums, and often no royalty at all on free goods records given away to retailers and the media. Because you only get paid on royalty-bearing records, you'll need a cap on free goods, otherwise you'll be in trouble.

Even though volume CD packaging these days is cheap, record companies typically make a royalty deduction of 20 to 25 percent deduction for it — which might look like a bit of a rip-off Overall, you might only get paid on 90 percent of actual sales, since retailers are able to return records they don't sell. The record label therefore holds on to a portion of your royalties, usually 10 percent, as a reserve, until all sales are verified.