Advances have been considered standard practice in the music industry for decades, but not everyone realizes there are different types of advances, and all of them come with a cost. Understanding each of the four types of advances can help a creative make the best choice for their business and keep doing what they love, creating music.
Often when a recording artist is getting ready to sign with a record label, they will be offered a record label advance as part of their contract. This should not be seen as free money! Labels will offer advances based on how they predict the artist’s music will perform. The label advance is taken against the artist’s future royalties. This means the artist will not receive any additional income from their royalties until the record label has been fully paid back for the advance, which is known as recoupment.
A publishing advance is given to songwriters as part of a co-publishing deal from a publisher. Co-publishing deals are typically split 50/50 between the publisher and the writers. This type of advance is given against future royalties from the songs they write. Payments for publishing advances can be split into monthly installments. A songwriter will not receive more money from royalties until the advance has been fully recouped, or paid back, to the publisher. The recoupment process is usually 100% of the songwriter’s portion of the earned royalties being paid to the publisher until the balance is cleared. From that point on, all royalties earned from the works are split 50/50 with the publisher.
Performance Rights Organizations (PROs), like ASCAP, BMI, or SESAC, collect and distribute performance royalties from creatives registered with them. While advances from PROs may not be considered as common, they still happen and work similarly to label and publishing advances where an artist will not begin to collect earned money from their royalties until they are recouped on the advance.
A royalty advance, otherwise known as royalty financing, can be done independent of a publisher or label, depending on the agreement. Royalty advances work by analyzing a creative’s royalty statements and forecasting how they will perform in the future. The sum of the advance is derived from that analysis. Royalty financing that does not attach to the underlying copyright and is for a fixed dollar amount for a fixed period of time provides an excellent option for creatives to access cash quickly without losing their creative freedoms.
Sound Royalties provides royalty advances without taking ownership of copyright. We also allow for ongoing royalty cash flow, giving creatives the added benefit of working capital during the term of their advance; not 100% recoupment. Sound Royalties will run a complimentary analysis on most types of royalty streams: mechanical royalties, performance royalties, digital royalties, sync, publishing, and more.
If you are earning more than $5,000 in annual royalties, contact us today to inquire about our funding services. Call us at 844-ALL-MUSIC or fill out the info form below, and someone will get back to you within the next business day.