Fresh New Artists, Bands And Deals
New artists and bands these days are seeing commitment from labels to do only one album or sometimes just two or three master recordings. Label now insist on getting a total of five or six album over the course of the contractual deal. In years past, labels wanted options for eight to ten albums a deal. Recently, the labels now commit to two albums at the beginning of the deal. This term is called two firm. This is how it works. If the first album sells less than 150,00 units in the United States, the label is no longer committed to the second album. So make sure the first album is a seller and doesn't tank.
Minor League And Farm Teams
In sports this is referred to as the developmental league. Meaning if a label likes your material but the band is just not ready for the big leagues. Your contract is referred to as a demo deal. This work by the record label spending very little money on your album. Recording costs usually. Demo is a short term for demonstration
recording. The label records you for a demo deal, and executives site around and discuss and decide if they want to sign you to a major deal. If they decide yes, the next step is then sign you to a regular deal. A developmental deal is the same as a demo deal, except the record label spends more money say $50,000. The difference is they will record a couple of master copies. Unlike the demo deal, the recoding contract is pre-negotiated so you can transition smoothly.
Minimize Options In Your Contract
The more options, terms, and clauses that are in your contract the worse it will be for the band or artist. These are added by the label to protect themselves from losing money and if you are a bust you will not see any money. A lot of options give the power for the record label to get out of your deal. This is never good for you. Keep the contract straight and to the point. Negotiate the best you can. So many options in the contract are never good for you at all.
Term And How Long?
When making your own music, the record company keeps you under an exclusive agreement called the term of your deal. In past years the term of your deal use to be a year, with options to renew for additional periods of one year each. These segments are called periods. Artist or bands would usually deliver two albums each year.
Next post, I will continue more about the artists deals.
* Each post I highly recommend a product that will help artists in recording. If you want to save money and record at home with a high quality recording product. This is a great music making software that is one of the best on the market! Click here.
Sunday, June 12, 2011
Saturday, June 11, 2011
Record Label Advances
Album Advance Formula
Today, I will get more into record company advances. A term that most record labels agree on is what is called a formula for advances. This is a mechanism that is designed to increase or decrease your deal if you are a success or a flop. So it works like this: Your bands advance for the second album is equal to a percentage that is usually 60% to 70% of all royalties earned by the first album under the contractual agreement. The advance for the third album is a percentage of of album number two's earnings, and so on. For an example, if album number one earns say $1,000,000 in royalties and you have a 60% formula, the advance for album number two is $600,000. Usually the formula percentage is based only on earnings in the United States and Canada. The earnings also have a time limit on what you can earn. After release of the album you have anywhere from six to eighteen months. Their are some variations including delaying the formula until the third album averaging earnings of the previous two albums as opposed to using the earnings only of the previous one.
Floor For The Formula
Say your first album is a dismal failure, and it earns only $20,000. How can you make an album for $12,000 to $14,000 (60% to 70% of the $20,000)? Well, you just can't, so this situation is handled by establishing a floor for the formula. The floor means no matter how terrible the earnings of the previous album, the fund will be no less than an agreed amount (floor). When artist receive an advance, the formula percentage is of course much less, about 15% to 20% range.
*I highly recommend this music making software. A great product for recording at home. Click here.
Today, I will get more into record company advances. A term that most record labels agree on is what is called a formula for advances. This is a mechanism that is designed to increase or decrease your deal if you are a success or a flop. So it works like this: Your bands advance for the second album is equal to a percentage that is usually 60% to 70% of all royalties earned by the first album under the contractual agreement. The advance for the third album is a percentage of of album number two's earnings, and so on. For an example, if album number one earns say $1,000,000 in royalties and you have a 60% formula, the advance for album number two is $600,000. Usually the formula percentage is based only on earnings in the United States and Canada. The earnings also have a time limit on what you can earn. After release of the album you have anywhere from six to eighteen months. Their are some variations including delaying the formula until the third album averaging earnings of the previous two albums as opposed to using the earnings only of the previous one.
Floor For The Formula
Say your first album is a dismal failure, and it earns only $20,000. How can you make an album for $12,000 to $14,000 (60% to 70% of the $20,000)? Well, you just can't, so this situation is handled by establishing a floor for the formula. The floor means no matter how terrible the earnings of the previous album, the fund will be no less than an agreed amount (floor). When artist receive an advance, the formula percentage is of course much less, about 15% to 20% range.
*I highly recommend this music making software. A great product for recording at home. Click here.
Friday, June 10, 2011
Royalties And Deals
Real Life Numbers And Escalations
It is very common to escalate royalties based on sales of records. Your royalty point usually goes up after certain amount of how many units are sold. For example, if your royalty is 12% it can go up to 13% for sales over 500,000 and 14% for sales over 1,000,000. The labels have put a cap on escalations which is maxed out at 19-20% range.
"All In"
This means that the artist or band is responsible, out of his or her royalty, for paying the record producer and mixer. Producer are paid a U.S. royalty in the range of 3% to 4% of PPD. If a producer becomes very successful they can demand 5-6%.
Advances
Back in the old days, artist would go to the studio, sing their butts off, and have nothing to do with the creative process. In those days the label set aside $10,000 for an album. The label paid all the recording costs. Remember that this is recoupable from royalties, just like an advance. It took two weeks to do an album back then. This was in the 1950's. Oh things have changed.
Funds
Today, most recording agreements are structured as funds. A fund is a set amount of money, which includes
both recording costs and any amounts that may be payable to the artist as an advance. Whatever the artist or band doesn't spend on recording costs goes into his or her pocket when making your own music.
1. New Artist Signing to Indie:
You could get zero to $300,000. This sounds like a huge range, but this is based on if you want a bigger advance and a smaller royalty. Don't expect the $300,000. This is very rare. A majority of the advance ranges from $25,000 to $100,000.
2. New Artist Signing To Major:
It your a rock band the range is $175,000 to $300,00 but can be $500,000 if you are hot and wanted.
Mid level:
$500,000 to $750,000 but if you are particularly hot, it can kick up to $1,000,000.
Superstar:
You will get a minimum of $1,500,000 and up. At this level, funds are computed on the basis of your past record sales and future expectations and bidding.
This is all for today. Here is a great music making software! Click here.
It is very common to escalate royalties based on sales of records. Your royalty point usually goes up after certain amount of how many units are sold. For example, if your royalty is 12% it can go up to 13% for sales over 500,000 and 14% for sales over 1,000,000. The labels have put a cap on escalations which is maxed out at 19-20% range.
"All In"
This means that the artist or band is responsible, out of his or her royalty, for paying the record producer and mixer. Producer are paid a U.S. royalty in the range of 3% to 4% of PPD. If a producer becomes very successful they can demand 5-6%.
Advances
Back in the old days, artist would go to the studio, sing their butts off, and have nothing to do with the creative process. In those days the label set aside $10,000 for an album. The label paid all the recording costs. Remember that this is recoupable from royalties, just like an advance. It took two weeks to do an album back then. This was in the 1950's. Oh things have changed.
Funds
Today, most recording agreements are structured as funds. A fund is a set amount of money, which includes
both recording costs and any amounts that may be payable to the artist as an advance. Whatever the artist or band doesn't spend on recording costs goes into his or her pocket when making your own music.
1. New Artist Signing to Indie:
You could get zero to $300,000. This sounds like a huge range, but this is based on if you want a bigger advance and a smaller royalty. Don't expect the $300,000. This is very rare. A majority of the advance ranges from $25,000 to $100,000.
2. New Artist Signing To Major:
It your a rock band the range is $175,000 to $300,00 but can be $500,000 if you are hot and wanted.
Mid level:
$500,000 to $750,000 but if you are particularly hot, it can kick up to $1,000,000.
Superstar:
You will get a minimum of $1,500,000 and up. At this level, funds are computed on the basis of your past record sales and future expectations and bidding.
This is all for today. Here is a great music making software! Click here.
Thursday, June 9, 2011
Making Your Own Music-What Level Is Your Clout?
What Level Is Your Band's Clout?
I am going to post today about your band's clout and what this all means. This is not so much a big deal if you are new and just beginning in the recording business industry. This really means what kind of bargaining power you are going to have at the table. There are basically three levels that you should be concerned about when making your own music.
New Artist
This is a band or artist that is fresh and new and had never before had a record deal, or someone who has signed before but has never sold over 250,000 copies of there albums per release. This also means that an artist once successful but somehow lost his or her following and is finding it difficult to catch on with a label.
Mid level Artist Or Bidding Artist
(1) This level means that your last album sold 500,000 to a 1,000,000 copy range. (2) You are a new artist or band and have various labels interested in you. Knocking your door down. This is a rare occurrence.
Superstar Level
This comes down to the number of albums you sell. To reach this level the number is a minimum of 2,000,000 copies to unlimited. If you are between 1,000,000 and 2,000,000 your deal will be what is called a "Mid level Plus". A deal that is in between mid level and superstar.
Variables And Combination Of Level
Here are a few examples of how some of the combinations work on this clout level. One example could be if you are a mid level artist and several labels are out bidding each other up, which means you will get a superstar level deal. On the other hand, you might be a successful artist that is clueless and naive and not get that superstar contract. Just have a great lawyer.
I will give a point of reference on album status. A gold album is one that sells 500,000 U.S. units, and a platinum album is one that sells 1 million U.S. units. The sales figures are certified by the RIAA (Recording Industry Association of America). This organization is made up of record companies.
Range Of Royalties For Three
New artist status gets 13% to 16% of PPD. Mid level gets 16% to 17%, and superstar level gets 18% to 20%. If you reach the superstar status you can do a off-center deal or a distribution deal where the artist owns the masters. PPD is the wholesale price of a CD. If your royalty rate is 15% and the wholesale price is $12.05. You multiply the two and you make $1.81. Interested in making your own music? Click here.
I am going to post today about your band's clout and what this all means. This is not so much a big deal if you are new and just beginning in the recording business industry. This really means what kind of bargaining power you are going to have at the table. There are basically three levels that you should be concerned about when making your own music.
New Artist
This is a band or artist that is fresh and new and had never before had a record deal, or someone who has signed before but has never sold over 250,000 copies of there albums per release. This also means that an artist once successful but somehow lost his or her following and is finding it difficult to catch on with a label.
Mid level Artist Or Bidding Artist
(1) This level means that your last album sold 500,000 to a 1,000,000 copy range. (2) You are a new artist or band and have various labels interested in you. Knocking your door down. This is a rare occurrence.
Superstar Level
This comes down to the number of albums you sell. To reach this level the number is a minimum of 2,000,000 copies to unlimited. If you are between 1,000,000 and 2,000,000 your deal will be what is called a "Mid level Plus". A deal that is in between mid level and superstar.
Variables And Combination Of Level
Here are a few examples of how some of the combinations work on this clout level. One example could be if you are a mid level artist and several labels are out bidding each other up, which means you will get a superstar level deal. On the other hand, you might be a successful artist that is clueless and naive and not get that superstar contract. Just have a great lawyer.
I will give a point of reference on album status. A gold album is one that sells 500,000 U.S. units, and a platinum album is one that sells 1 million U.S. units. The sales figures are certified by the RIAA (Recording Industry Association of America). This organization is made up of record companies.
Range Of Royalties For Three
New artist status gets 13% to 16% of PPD. Mid level gets 16% to 17%, and superstar level gets 18% to 20%. If you reach the superstar status you can do a off-center deal or a distribution deal where the artist owns the masters. PPD is the wholesale price of a CD. If your royalty rate is 15% and the wholesale price is $12.05. You multiply the two and you make $1.81. Interested in making your own music? Click here.
Wednesday, June 8, 2011
Making Your Own Music-Royalties And Recoupment Part Two
A Method Called Cross-Collateralization
Today's post is what is something called cross-collateralization. You are thinking to yourself, what is this? Sounds a bit confusing. This term is built into every and any record deal out there today. Let's say that you get $200,000 for your first album. plus another $200,000 for the second album. Now let's say that you make
$20,000 in royalties on album number one, and album number two earns $220,000 in royalties. If the two albums are not cross-collateralized, you would get nothing for album number one earned only earned back $20,000 of the $200,000 advance, so it's $180,000 unrecouped. This would be a deficit and carries over to the next album.
Cross-Collateralization Of Deals
This can also refer to different types of agreements in your contract with the label. These can be simultaneous agreements. Let's say an artist signs a recording contract and publishing agreement with the same company. This means that advances under either agreement can be recouped from royalties under both. This is very bad for the artist or band. Major labels don't usually try to do this in the contract combining
record deal and publishing deal. Small label or indie's will try this method. An untrained eye can miss this. Make sure your lawyer catches this condition. It says that advances can be recouped form royalties payable, and royalties can be used to recoup advances paid under this or any other agreement. A record contract is very complex and the average Joe will have no clue what 99% of the contract means. Take your time and don't just sign a contract unless you understand everything. Have you lawyer explain everything clearly.
If you want to record at home, here is a great music making software to use. I highly recommend it. It is very inexpensive and is a great tool. Click here.
Today's post is what is something called cross-collateralization. You are thinking to yourself, what is this? Sounds a bit confusing. This term is built into every and any record deal out there today. Let's say that you get $200,000 for your first album. plus another $200,000 for the second album. Now let's say that you make
$20,000 in royalties on album number one, and album number two earns $220,000 in royalties. If the two albums are not cross-collateralized, you would get nothing for album number one earned only earned back $20,000 of the $200,000 advance, so it's $180,000 unrecouped. This would be a deficit and carries over to the next album.
Cross-Collateralization Of Deals
This can also refer to different types of agreements in your contract with the label. These can be simultaneous agreements. Let's say an artist signs a recording contract and publishing agreement with the same company. This means that advances under either agreement can be recouped from royalties under both. This is very bad for the artist or band. Major labels don't usually try to do this in the contract combining
record deal and publishing deal. Small label or indie's will try this method. An untrained eye can miss this. Make sure your lawyer catches this condition. It says that advances can be recouped form royalties payable, and royalties can be used to recoup advances paid under this or any other agreement. A record contract is very complex and the average Joe will have no clue what 99% of the contract means. Take your time and don't just sign a contract unless you understand everything. Have you lawyer explain everything clearly.
If you want to record at home, here is a great music making software to use. I highly recommend it. It is very inexpensive and is a great tool. Click here.
Tuesday, June 7, 2011
Making Your Own Music-Advances and Recoupment
Advances For Bands And It's Basic Concept
Today I will discuss how advaces for bands or a solo artist works when you sign to a record label.
This is a bit deifferent form say when a professional athelete signs a contract. I will get into the differences in a bit. I will mentioned it now so here we go. An advance works when the label gives you a bunch of money right on the spot when you sign with them. There are many terms but I call it "upfront "money". Let's say you get a million dollars upfront. It works sort of like a loan. The label will than keeps your first million dollars you earn through all income and royalties until that million is recovered. This is called "recoupment". If you hace an amount of money that has not been recovered is your deficit or called red position. It is as simple is that when making your own music.
Other Details To Know About Recoupment
Monies paid directly to the artist or band are not the only recoupable monies. Recording costs are also considered recoupable from your royalties, and some portions of video production costs, independent promotion such as, monies paid on behalf of the band or artists to buy equipment or to support a personal appearance. It is not just recording time. Equipment rental, travel, arranging instrument transportation, etc. There is something called a union scale that means the minimum amount a union requires everyone to pay all it's members paid to you and others that perform at recording sessions. A contract will have general provisions that indicate all amounts paid to you or on your behalf or others in connection with the agreement are recoupable unless it states otherwise.
Next post I will get into more about recoupment and some other terms that you need to be familiar with.
Today I will discuss how advaces for bands or a solo artist works when you sign to a record label.
This is a bit deifferent form say when a professional athelete signs a contract. I will get into the differences in a bit. I will mentioned it now so here we go. An advance works when the label gives you a bunch of money right on the spot when you sign with them. There are many terms but I call it "upfront "money". Let's say you get a million dollars upfront. It works sort of like a loan. The label will than keeps your first million dollars you earn through all income and royalties until that million is recovered. This is called "recoupment". If you hace an amount of money that has not been recovered is your deficit or called red position. It is as simple is that when making your own music.
Other Details To Know About Recoupment
Monies paid directly to the artist or band are not the only recoupable monies. Recording costs are also considered recoupable from your royalties, and some portions of video production costs, independent promotion such as, monies paid on behalf of the band or artists to buy equipment or to support a personal appearance. It is not just recording time. Equipment rental, travel, arranging instrument transportation, etc. There is something called a union scale that means the minimum amount a union requires everyone to pay all it's members paid to you and others that perform at recording sessions. A contract will have general provisions that indicate all amounts paid to you or on your behalf or others in connection with the agreement are recoupable unless it states otherwise.
Next post I will get into more about recoupment and some other terms that you need to be familiar with.
Monday, June 6, 2011
Making Your Own Music-CD Royalties
Compact Disk Royalties
Today I will discuss more about royalties and how they are computed today. Record companies decided to go to a newer system which was implemented in 2006. Older contracts involved royalties on cassettes and not CD's. This is not entirely true. When compact disks came out they were super expensive to manufacture than cassettes so in turn the record labels paid a lower royalty out to the artists. There was no set percentage. This had to be worked out in the negotiation process.
1. Your royalty rate for compact disk was however a reduced percentage of the cassette rate.
2. The computation of the suggested retail list price for CD's varied from company to company. A majority of the the companies use what is called the uplift of the wholesale price, meaning they multiplied the wholesale price by a percentage usually being 130% for the major labels. So let's say the wholesale
price is $10, the uplifted price would be $13. This is 130% of $10. Your royalty rate would be applied to the constructed retail price or new price.
3. The packaging deduction for CD's was 25% as opposed to 20% for cassettes, and 10% for vinyl.
*Here is some info form the past that does not exist today. Their was a time that artists only got 90% of net sales because records were made of shellac and were easily breakable. So the record labels developed a practice for paying on 90% of the shipment and keeping the remaining 10% to cover there breakage. This was one of many ways to nickel and dime the artist.
Today I will discuss more about royalties and how they are computed today. Record companies decided to go to a newer system which was implemented in 2006. Older contracts involved royalties on cassettes and not CD's. This is not entirely true. When compact disks came out they were super expensive to manufacture than cassettes so in turn the record labels paid a lower royalty out to the artists. There was no set percentage. This had to be worked out in the negotiation process.
1. Your royalty rate for compact disk was however a reduced percentage of the cassette rate.
2. The computation of the suggested retail list price for CD's varied from company to company. A majority of the the companies use what is called the uplift of the wholesale price, meaning they multiplied the wholesale price by a percentage usually being 130% for the major labels. So let's say the wholesale
price is $10, the uplifted price would be $13. This is 130% of $10. Your royalty rate would be applied to the constructed retail price or new price.
3. The packaging deduction for CD's was 25% as opposed to 20% for cassettes, and 10% for vinyl.
*Here is some info form the past that does not exist today. Their was a time that artists only got 90% of net sales because records were made of shellac and were easily breakable. So the record labels developed a practice for paying on 90% of the shipment and keeping the remaining 10% to cover there breakage. This was one of many ways to nickel and dime the artist.
Subscribe to:
Posts (Atom)