Advances, Recouping and Cross-Collateralization: Part 1

So you’ve worked your ass off to attract a label, publisher, or production company to want to sign you to a deal and they’ve either presented a full contract or a deal memo.

The first thing that most people want to know when they are approached with a contract situation is how much the advance is. “The advance is an ‘advance’ payment of your royalties that have yet to be earned and the talent will not receive a royalty payment until the advance is recouped.” (Passman, pg. 85–87)

Usually, all or at least a portion of the advance is paid out upon execution of the agreement and the rest of the advance is contingent upon particular circumstances. These circumstances can be based on a particular date, an album or a number of songs being released on a major label, or a number of other triggering events. Money paid directly to the artist, producer or songwriter isn’t the only money labeled an advance.

The recording budget, video budget, promotion, advertising, and travel costs are all money that the label, publisher, or production company will advance to the artist, songwriter, or producer. The amount of money that a musician is advanced directly impacts how soon a musician recoups and begins receiving royalties for their work.