In the components of the Exclusive Recording Artiste Agreement or Recording Contract, the Artiste Advance is the part that is of immediate benefit to the artiste in the deal. The artiste receives an Advance from the label in exchange for the exclusive license to own/publish and exploit the Sound Recording Copyright and the Copyright in the Compositions of the songs the artiste will record for the label. This leads us to the definition of the artiste advance.
You may be familiar with the word Advance and not the meaning, well, an Advance is the advanced payment (cash or check) of Royalties that the label pays the artiste, primarily to record an album.
Ideally, the record label recoups or recovers the Advance from the artiste’s record sales
There are two types of Artiste Advance an artiste may receive based on the clauses of his Recording Contract.
- Personal Advances
This Advance is earmarked for the artiste’s personal use only – clothing, trips, debauchery, investment, giveaway, or dorime. The record label will not require the artiste to keep records or receipts of spendings. The artiste basically decides how they spend this advance. The label recoups this advance from the artiste’s royalties.
- Album Fund Advances
This Advance is well known. The Advance covers the cost of the production of the Artiste’s album for the label. This means the artiste must make do with the provided fund and ensure it covers recording sessions, producers, arrangers, engineers, and sometimes, personal expenses (if no personal advance is given) for the album production. This is the Advance where receipts and records are kept.
If there is still cash remaining after the album has the produced, the excess cash is transferred to the artiste as a Personal Advance. If the artiste exhausts the Advance before the album is ready, the artiste may be required to cover the deficit with their personal funds, or, the label could terminate said artiste’s contract.
In a Record Deal, the money budgeted and spent on the artiste and his album is recoupable only from the artiste’s royalties only – except in a 360-degree deal.
There are some expenses that are not fully recoupable from artiste royalties by the label in a well-negotiated deal.
- Music Video: The label provides the cost for the music videos for promotion of the artiste’s singles and album during the album cycle. Although it is recoupable from the artiste’s royalties, the artiste and his team can press for a 50% cost split, i.e. the label only recoups 50% of the music video cost.
- Independent Promotion: Independent promoters usually claim to have a SPECIAL relationship with radio programmers and charge labels to promote the artiste’s single(s) on radio for a fee. The label and artiste can also split this cost 50-50 if the deal is negotiated properly.
Independent Labels that enter a 50-50 deal with an artiste usually recoup all of their expenses – Album Fund Advances, Personal Advance, an independent promotion, and music video cost – from the artiste’s royalties.
In a scenario where the label hasn’t recouped its Advance, but a significant amount of album copies have been sold, the label can move ahead to recording a second album, thus giving the artiste a second Advance. The deficit from the previous Advance will be included in the new one. This transfer of deficit is called Cross-Collaterisation.
It is advisable for artistes to negotiate for as much an advance as they can get from the label. The reason is some artists may not receive royalties until 2-3 years after the album release. This is because the label is yet to recoup the Advance rest of the advance through sales.