What is a royalty?
In the real world, the word
royalty is synonymous with the power or rank
of a king and queen. In the music world, the
word royalty is synonymous with money.
Royalties are the most important entitlements
of the musician. These entitlements warrant
them to receive money from their craft - the
craft of MAKING MUSIC.
Royalties
There are many types of royalties. The list is
constantly growing because of the new
technology, but here are some to name a few:
Artist Royalties, Mechanical (Publishing)
Royalties, US Performance Royalties
Synchronization Royalties, Grand Rights
Royalties, Foreign Royalties for record sells
and performances, Lyric Reprint Royalties.
General definition
Artist Royalties, in a nutshell, are monies paid
to the recording artist from the record
company. They are the share of the proceeds
from the sale of the artist’s records paid
directly to the artist after the artist records
material for the record company. This, in turn,
gives the record company permission to
exploit the musical work in the marketplace.
Recording contracts
In artist recording contracts, artist royalties
are usually negotiated in points. When record
label business affairs attorneys use that
terminology, they are referring to the
percentage points the record company will
pay an artist on each album sold.
For
example, if an artist gets 10 points, it usually
means that the artist receives 10% of the retail
cost of each record sold.
1. Superstar Deals Royalties usually are:
• 16%-20% of retail of top-line
records plus escalations
• 18-20% is quite high and the artist
must sell a lot of records - usually
more than 5 million
• 100% CD rate and can receive new
configuration royalties
• 12-14% of singles + escalations
receive increased royalties when
contract options are exercised
2. Mid-Level Deals Royalties usually are:
• 14%-16% of retail top-line records
plus escalations (escalations usually
based on genre)
• 16% is high and the artist must sell a
lot of records
• 85-90% CD rate and new
configurations
• 12-13% of singles or 3/4 of LP rate
receives increased royalties when
contract options are exercised
3. New Artist Deals Royalties usually are:
• 11%-13% of retail top-line records
• 75-85% CD rate and new
configurations
• 10-11% of singles
When to renegotiate
If the artist sells a ton of records,
the artist can usually re-negotiate
with the record label and try to
receive increased royalty rates.
• Increase net royalty rates on remaining
LPs in the contract increase rate for each
successive LP include escalations for
attaining sales plateaus
• Receive the increase royalty rate on
future sales of past LPs improve the
royalty computations increase foreign
rates, the CD rate, the new technology
rate, licensing fees and free goods
• Reduce the recoupment percentages
Record royalty formula
The record royalty formula is usually based
upon a percentage of records that are sold. In
using the formula, the record company looks
to the retail price of the commercial top-line
records and standard deductions that every
record company takes from the gross income
from the sales of those records. Some of the
deductions are: recording costs of the records,
packaging, returns and reserves, discounted
military sales, video costs, tour support,
promotional records and free goods. Please note: records on which royalties are
paid are quite different from deductions from
gross royalties.
by Joyce Sydnee Dollinger, Entertainment Lawyer
© 2010 All Rights Reserved. Used By Permission
