It is impossible to predict exactly how much money an artist can expect to make on record sales. Each record deal is negotiated differently and there are factors such as changes in dealer prices, free or bonus stock and tax legislation to take into account.
Independent record companies
Indies sometimes offer a 50/50 split of profits after all costs have been recovered by the record company. These costs would include any advances paid to the artist, and all recording, manufacture and production costs.
Indie labels do now have the financial clout of a major, therefore they need to construct their deals in a different way.
Major record companies
Most major companies stick to a percentage system. They pay for all the costs and then pay the artist a percentage of sales – after the advance has been paid back.
A new artist might enter the initial term of a record deal with a typical royalty around 12-18% of the wholesale price or ‘PDP’ – (published dealer price). This is roughly equal to 7-12% of the retail price (the price in the shops).
The industry jargon for percentages is ‘points’. So 12 points means 12%.
Artists with a proven track record may negotiate 20% or more of the PDP, which is around 14% of the retail price.
Important note:
The record producer that the company engages on your behalf will almost certainly require a percentage on sales too. Make sure that you know who is paying for this, as it could be coming out of your share!
Singles and albums
The artist's percentage share on sales of singles is usually less than that of the album percentage. This is because the single is generally used as a promotional tool and often makes a loss. The same principle would apply to compilation albums, budget (mid-price) products, book clubs and sales outside the UK.
Returned or damaged stock
It is worth remembering that even when a band ‘goes gold’ selling in excess of 100,000 copies, they are likely to be paid against 90 percent of sales (sometimes less). This allows for returned or damaged stock, but you should ask your legal adviser to limit this as much as possible in the negotiations.
Freebies
The record company will want to give away quite a lot of product for promotional purposes. Although they pay for the manufacture of the records, remember that you will not get any royalties on these items.
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