Label Deals 101: Is a Music Advance Really Worth It?

If you’re reading this, you probably know how much blood, sweat and tears go into creating a new record. That’s why most artists feel like they’re on top of the world when they manage to get signed to a reputable record label and get a music advance, as this is perceived as a symbol of “making it” in this cut-throat industry. Question is – does getting a chunky advance really make you rich? And what’s the catch?

The Basics: What is a music advance?

So, what is a music advance? A music advance can be defined as the pre-payment of royalties. There are a few things you should keep in mind when you get signed to a label and are in the process of getting an advance.

Major labels are significantly more likely to give a larger music advance than an independent label due to bigger budgets. Typically, independent labels calculate music advances depending on how much they can pay, while still having enough money to promote the release.

There are also two main types of music advances – the masters advance and the publishing advance. The former is the money that’s projected to be made from digital and physical distribution, while the latter is an advance against future publishing (a.k.a. songwriting) royalties that the artist will eventually earn.

A question that we often hear is: why do two artists who seem to be similar end up getting different music advances? The answer to that question is not super clear cut as it depends on several factors, such as:

• whether other labels are interested in the artist. This is commonly known as a bidding war.
• whether the artist is already famous or not
• whether Artist A’s team is better than Artist B’s at “selling” the artist
• whether the artist has an inbuilt audience or not
• whether Artist A’s lawyers are better at negotiating the deal than Artist B’s 
• whether an artist has a strong live show and can draw a sizeable crowd
• whether they have an engaged audience on social media 

An advance vs a bank loan

Some of the advantages of getting a music advance from a record label instead of taking out a bank loan are that you don’t have to pay any interest on the advance, and that you’re essentially getting a whole team of people who will help promote your music career. However, advance deals come with strings attached.

You’re basically signing away your rights to the label for X amount of years, sometimes decades. Then, there’s the issue of recoupment. Essentially, this means that you have to earn enough money to repay the advance before you can make a profit. Most majors add things like touring, rehearsals, brand deals, merch, etc. (collectively known as Collateral Entertainment Activities or 360 deal) to keep artists in unrecouped advances. This makes it almost impossible for artists to recoup the money and cut ties.

Final notes

Nowadays, options such as crowdfunding have enabled artists to become more picky when choosing a label. Artists such as Taylor Swift and Raye have taken to social media to express their frustration with their previous labels for unfair deals. With any luck, this will eventually lead to more artist and performer-friendly deals in the future, to the point where artists can once again regain control of their artistic efforts – as it should be, after all!