In the music industry, percentages earned from album sales are called "royalties". Royalties from the sale of albums will be the main source of income that you, as a recording artist, will receive from your recording label contract. The promise of receiving royalties constitutes the biggest rationale for you to sign a recording contract, while the label company advances money to get your first album recorded and mastered and to the marketplace, and all you have to do is perform.

Hold on, there! Wait a minute! Most royalties for new artists run around 10%. Before signing a deal, note the basis used for calculating those royalties you have your eye on. Contracts struck on wholesale rather than retail prices can mean some pretty pitiful royalties for you. Also keep in mind that thousands of new albums are put forth annually, and few of them sell in industry noteworthy numbers.

Royalties can be affected by charges added for pressing, packaging, promotional giveaways, and discounts for vendors. Contracts for royalties may stipulate that the artists get nothing for CDs that are given away in promotional marketing campaigns, and it’s not uncommon for artists to be charged for costs associated with album production: labor, royalties to songwriters, fees to publishers, tours made on behalf of the album, shipping costs, advertising, warehousing CDs, and company legal fees. Incidental costs might include office space, office supplies, equipment, staff benefits, and taxes. Such stipulations can mean that deductions all come out of your royalties before you even see a single dime.

Don’t be pressured into signing a recording contract, royalties or not. Do your homework by reading, discussing with peers, and researching the Internet for information about royalties contracts. You may also need a lawyer that works in the entertainment industry to represent you and your interests. Recording contracts have been so inequitable as to force bands into bankruptcy, force artists into poverty, and cause artists to live on welfare by the time they leave this world.

Some labels are showing respect for the art and the artist and are posing alternative approaches to label production. More respectful royalties agreements divide net profits from album sales equally between label and artist. Keep in mind that if one label shows interest in your music, others will also envision viable profits from their association with you. You want exposure to build your career, and you want your label to assist you in promoting your music. Deductions from royalties for marketing can include promotional materials, promotional tours, airplay, photos, etc., and you want the most from your time and effort as well as from your label.

Recording contracts should specify a contract period, a deadline for an album to be produced, a minimum financial commitment from the label company, and fair royalties payments. Don’t accept anything that is not clearly spelled out, and expect to give up rights and ownership of songs. Contracts may include a lockout clause for the protection of the label company that provides an option to reject an album and shelf it. You may be required to produce a second album.

Recording contracts can legally bind you. First contracts generally stipulate one year for recording and releasing the first album, royalties to be divided, and termination details. Subsequent contracts may be presented with a whole new set of royalties, options for albums, and periods of time. Read everything, including fine print. And keep an open ear and an open mind. Understand everything you are agreeing to and everything the label will receive from you. And don’t sign anything you don’t like!

Good luck out there!

This article provides an overview of royalties. If you would like to submit an article about royalties or any other music-related subject, please feel free to do so here at Media Positive Radio.