by Jeff and Todd Brabec
Depending on the stature of the artist and the type of contractual relationship entered into between the record label and the performer (e.g., artist signing directly to the record company, artist being signed through a production company, artist signed through a third party by means of an inducement letter), the costs of recording an album are paid directly by the record company, by the artist, or by the artist's production company.

If the artist is signed directly to the label and does not have an established sales base, is recording a first or second album, or has not had great success, the record company will usually control the purse strings and retain control of all payments relative to the recording and delivery of the album.

If the artist is established and has prior experience in the financial aspects of recording albums, however, the record company will many times provide the artist or the production company with an album fund from which all recording costs will be taken. This fund, which usually takes the form of an up-front advance, but which can be structured on a reimbursement basis, enables the artist or production company to pay all recording costs.

In most cases, if the artist's expenses do not exceed the recording fund (e.g., if the artist spends $75,000 out of a $100,000 recording fund), the amount left over is kept by the artist and treated as an additional advance recoupable from the artist's royalties.

The costs of recording an album, single, or any other recorded configuration designed for commercial release are always treated as advances to the recording artist and recoupable from royalties due that artist.

Such costs are recoupable not only from royalties derived from the album for which they were incurred but also from royalties due the artist from all other recordings produced during the term of the agreement.

In other words, recording costs are cumulative during the term of the recording contract, and the record company will be able to recoup royalties due from any recording released during the agreement to cover any recording costs expended during the agreement.

It is more than possible, therefore, that an artist can have three unsuccessful albums and a major hit on the fourth album and still receive no royalties because of the overall debit balance incurred from the unrecouped recording costs of the initial three albums.

© 2007 Jeff Brabec, Todd Brabec

This article is based on information contained in the new, revised paperback edition of the book "Music, Money, And Success: The Insider's Guide To Making Money In The Music Business" written by Jeffrey Brabec and Todd Brabec (Published by Schirmer Trade Books/Music Sales).

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