Music Contracts & Royalties Defined
By: Ty Cohen
Artists often wonder how their royalties are going to be computed when they sign music contracts. This is truly an important question because basically determines how much money is going to end up in their pockets. Recording contracts are meticulous and somewhat confusing so I will try to explain royalties to you as simple as possible.
A band or artist’s royalties are totaled as a percentage of the “suggested retail list price” for the total number of records sold. A general percentage that most artists will find in their music business contracts is anywhere from 7% to 16%. This will obviously depend on who you are and what the expectations are for your record sales.
Remember, royalties are the only place you are going to make your money but it is an important part of your contract. Royalty is expressed either as a percentage, a point or in escalations. Escalations suggest that you get a flat rate for up to a certain amount sold. Then your rate would go up if you sell over and above the first amount.
Depending on the company you have the music contract with, you may find that your royalties could include a packaging deduction or not include one. If it does not include one then you may find that the royalty price is reduced and then your royalties will be calculated. This is why it is vital that you read and re-read your music business contract before you sign so you completely understand.
Keep in mind that there may be a producer’s royalty that you are entitled to take care of from your own royalties. So, let’s say you had a royalty of 13% and the producer’s royalty was 2%, you would only receive 11%.
Other than these industry standard deductions, you may see deductions for free goods that might go to wholesalers meaning your wouldn’t receive royalities for these records. Also, promotional records such as those sent to radio stations are not included as well.
Keep in mind your royalty account can be charged for any item that is included in signed recording contracts. This is why it can’t be stressed enough that you need to understand every detail of what you sign because it may not be a dream come true after all. So, be careful, don’t be afraid to ask questions and don’t be afraid to seek the help of a professional.