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In Reply to: RE: A well-written essay posted by David Smith on June 18, 2012 at 17:36:45
The letter-writer claims that record labels view royalty advances as wagering, that advances are recoupable only from royalties, and that if the record does not make money, the record labels write the advances off.
These statements are not always true. If we are talking about fairly trivial amounts of money, for many labels they might be true. Keeping in mind that all the money artists receive in respect of a recording might not be advances from a legal point of view; some musicians may be entitled to union minimum payments for the recording sessions, and those would not be advances.
There have been famous cases where performers or bands got in over their heads when the advances were legally loans--either having to record more albums at very reduced royalties (or no royalties) or, tour to raise cash to repay the advances in cash.
This last was the choice made by The Grateful Dead when the huge advances paid to induce them (IIRC) to change labels were in fact loans, and the maiden LP on the new label did not do well. So The Dead toured for almost two years, just to repay the advances.
Ciao,
JM
Follow Ups:
There have been famous cases where performers or bands got in over their heads when the advances were legally loans--either having to record more albums at very reduced royalties (or no royalties) or, tour to raise cash to repay the advances in cash.
Right. A lot of times a recording contract is nothing more than a cash loan from the recording label.
Not sure what the terrible side of that is if that's the insinuation.
For a lot of artists it's not worth doing -- they become slaves to paying back the up front.
"some musicians may be entitled to union minimum payments for the recording sessions, and those would not be advances."
Well, "advance" does not usually refer to fees for musicians, which are miniscule (in the hundreds of dollars) relative to advances (which not long ago were in the several tens of thousands of dollars even for unknown indie bands). Some may be structured as loans, I don't think that represents the majority of cases though.
In your example above, the Dead still earned that money, they got a "loan" against future earnings. In that case perhaps the record company didn't "eat" anything, I don't know the details, but in many cases the record company doesn't recoup the advance money.
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