01/31/2024
I just listened to a friend talk about music publishing and specifically about how bad it is to take an advance from a publishing company. I agree for the most part unless you are a hit writer. Here's what independent artists need to know about any type of advance or record deal.
I know many of you are frustrated with how money flows in the industry, but I encourage you to do everything you can to stay independent and here are a few reasons why. If you sign to a major or small independent record label, it takes a minimum of 90 days after the release of your music for the distributor to start issuing royalty payments. Payment also depends on whether you release at the beginning, middle or end of the cycle as well as the minimum threshold for payment from the distributor. If you sign a typical 360 deal, the split is 80/20. The label gets 80% and the artist gets 20% that goes toward the project debt. There can be a lot of folks to feed out of the 20% such as executive producers, vocal producers, music producers etc. The artist has to rely on their tour money to keep afloat. 360 deals take a percentage of everything earned. That’s 80% of your music, merchandise, and brand deal if you have one.
Let’s talk about artist advances. Advances are debt the artist owes the label. Here are the 4 most common types of advances.
Label Advance - Often when a recording artist is getting ready to sign with a record label, they will be offered a record label advance as part of their contract. This should not be seen as free money! Labels will offer advances based on how they predict the artist’s music will perform. The label advance is taken against the artist’s future royalties. THIS MEANS THE ARTIST WILL NOT RECEIVE ANY ADDITIONAL INCOME FROM THEIR ROYALTIES UNTIL THE RECORD LABEL HAS BEEN FULLY PAID BACK!!! This is known as recoupment.
Publishing Advance - A music publishing advance is given to songwriters as part of a co-publishing deal from a publisher. Co-publishing deals are typically split 50/50 between the publisher and the writers. This type of advance is given against future royalties from the songs they write. Payments for publishing advances can be split into monthly installments. A songwriter will not receive more money from royalties until the advance has been fully recouped or paid back to the publisher. The recoupment process is usually 100% of the songwriter’s portion of the earned royalties being paid to the publisher until the balance is cleared. From that point on, all royalties earned from the works are split 50/50 with the publisher.
PRO Advance - Performance Rights Organizations (PROs), like ASCAP, BMI, or SESAC, collect and distribute performance royalties from creatives registered with them. While advances from PROs may not be considered as common, they still happen and work similarly to label and publishing advances where an artist will not begin to collect earned money from their royalties until they are recouped on the advance.
Royalty Advance - A royalty advance, otherwise known as royalty financing, can be done independent of a publisher or label, depending on the agreement. Royalty advances work by analyzing a creative’s royalty statements and forecasting how they will perform in the future. The sum of the advance is derived from that analysis. Royalty financing that does not attach to the underlying copyright and is for a fixed dollar amount for a fixed period of time provides an excellent option for creatives to access cash quickly without losing their creative freedoms.
Advances are also made for marketing and promotional expenses. The label uses revenue earned to pay staff and expenses. If you consider the 90-day payment period, that means every 3 months, a payment will be made on the debt. All marketing and promotional expenses will be taken care of first otherwise stated in the contract. Unless the record is big enough, there is little to no chance they will ever recoup. You can start to see why artists stay frustrated.
Here's what ole dad suggests. Stay independent as long as you can unless you can find a more equitable way to partner with a label or artist services company like https://ruralrouteentertainment.com/ . Do Not Sign A 360 Deal!!! Don’t rush the process. Don’t depend on a label to be your saving grace. A record deal today can just be a very bad loan.
Use all the tools you have, including social media to build your audience. Remember is better to have fewer fans that spend money on your music and merch than thousands who are passive or casual listeners.
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