The artist still gets to keep their advance, but-in the event that they've signed a multi-album deal-the remainder of their unrecouped balance carries over to their next record. So what happens if, between revenue from streams, sales, and digital downloads, an artist doesn't break even?īasically, that means they never managed to pay back the loan they owe the label. It is! Almost no one manages to achieve that, aside from superstars like Drake and Taylor Swift. Getting 1.2 billion streams on one album seems like a pipedream. Using the above example, an artist's album would need to generate 1.2 billion streams across all platforms to make $6 million, and for the artist to break even. According to an industry survey conducted by Digital Music News, record labels make an average of $0.005 per stream on a platform like Spotify or Apple Music. In a world where streaming has largely supplanted physical album sales and digital downloads, how many streams would it take to make that much?Ī ton. Of that $6 million, $1.2 million covers their advance and recording costs, and the rest-$4.8 million-goes to the label. From that point on, the artist begins to earn twenty cents on every dollar their album makes. Here's how that works: $6 million (what the album earns) multiplied by 20 percent (what the artist gets from those earnings) equals $1.2 million (what the artist owes the label). With a royalty rate of 20 percent, their album has to earn $6 million before they break even. That means the artist has an unrecouped balance of $1.2 million. Let's say a label gives an artist a $1 million advance and it costs $200,000 to record their album. The problem is, for that to happen, the record has to generate a whole lot more money than the record company invested in it to begin with. Once they've paid back all of that money-known as their unrecouped balance-then, and only then, will they see royalty money hit their bank account. If an artist secures a royalty rate of 20 percent, for every dollar their album makes, 20 cents go toward paying off what they owe the label. According to the American Society of Composers, Authors, and Publishers, an artist's royalty rate usually falls somewhere between 10 and 25 percent.). Something important to consider with standard royalty deals is that all of the money the label "gives" an artist up front, in the form of their advance and recording costs, is actually a loan, one the artist is obliged to pay back through the proceeds from their album. In exchange, the label gets to own the recordings on that album, known as the master recordings, along with any revenue those masters generate through sales and streams-though it will pledge to give artists a percentage of that revenue, known as the royalty rate. When an artist signs a standard royalty deal with a label, the company gives them a chunk of cash that goes straight into their bank account (known as an advance), which is used to keep them financially afloat while they record their album, in addition to fronting the money they need to make it.
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