A seasoned music and entertainment industry professional with more than a decade of experience, Jeremy Geffen has worked with some of the most prominent names in talent representation, management, and consulting. He has helped to guide the careers of many major artists, including D12, Three 6 Mafia, and Sisqo. Currently, Jeremy Geffen serves as President of his own consulting company, Geffen Management Group. Here, Mr. Geffen discusses how royalties work in a basic recording contract.
Like any contract, a recording contract is enforceable by law. When artists consider signing one, they should always try to obtain the advice of an experienced professional with their interests at heart. They may include an agent, manager, or entertainment lawyer. The professionals can look at the specifics of any contract and help explain what they may mean for an artist’s particular situation. For many artists, the chief goal in signing a contract is the opportunity to get paid for making music. Generally, this process works through royalties. A record company handles the recording, mastering, production, and sales.
The firm also pays the artist a percentage of each album sold, which is known as royalties. While artists may obtain income from other sources, like ticket sales on a tour or merchandise, the main source of revenue in a recording contract is royalties. A recording contract will stipulate that a percentage be paid in royalties, usually ranging from between 10 and 20 percent. The more established that an artist is, the higher the percentage he or she may receive.
The amount of revenue an artist makes depends both on the percentage of royalties and on how well the record sells. It is important to note that most contracts pay royalties on the wholesale price of the album rather than the retail price. Since the wholesale price is substantially lower, this may seriously impact the projected earnings from royalties.