Recording Artist Royalties

This overview is mainly concerned with some of the major sources of songwriter/publisher earnings, but since many songwriters are also recording artists, a brief mention should be made of the contractual factors that affect income in the recording arena. One should bear in mind though that recordings contracts represent an extremely complex area, and care should be taken in reading all contract provisions. Under the traditional recording agreement, recording artist royalties usually range from 10% to 25% of the suggested retail price for top-line albums (although many record companies have begun to compute royalties on the wholesale price). However, there are many deductions made for items such as packaging costs; free goods; responsibility for the payment of producer royalties; reserve accounts; return privileges; midline, budget-line, record-club, and foreign royalty reductions; 90% sale provisions; new-technology rate reductions; new or developing artist reduced royalties; cut-out and surplus-copy provisions; video, tour support, and promotion expenses; recording costs; advances for not only the current album, but past albums as well; ownership of websites; and merchandising rights. In addition, if the artist is a songwriter, there are provisions in the recording agreement (known as the "controlled composition clauses") which reduce and limit, among other things, mechanical royalties.

New forms of recording
arrangements are emerging
in the marketplace reflecting
the changing record industry
landscape.

Some of the changes being discussed, and in some cases implemented, in newer recording agreements include one royalty rate for all territories (rather than reduced percentages for foreign country sales) and for all formats (CDs, tape, vinyl, etc.); the elimination of the "New Media Royalty deduction" for downloads and Internet sales; elimination of packaging/container deductions for downloads; the higher album royalty rate to be applied to downloads of individual tracks, rather than the lower physical product single royalty rate; and the sharing of some types of income on a 50/50 net basis.

In addition, new forms of recording arrangements are emerging in the marketplace reflecting the changing record industry landscape. These include so-called "360" deals where, for a consid- eration, a record company or other entity shares in some or all of an artist's non-recording income (e.g. live concerts, merchandise, etc.), deals by new types of non-traditional recording entities (e.g. Starbucks, MySpace, video game companies, etc.) and new distribution models.

© 2007 Todd Brabec, Jeff Brabec
For more information, check out the book Music, Money and Success: The Insider's Guide To Making Money In The Music Business (Schirmer Trade Books/Music Sales/502 pages) available for sale at Amazon.com, Barnes & Noble, Borders, Music Sales Group and www.musicandmoney.com.


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