How Should You Pay Your Music Producer? Advances and Royalties
How do music producers get paid?
Having the right music producer can have a huge impact on an artist's album, and it can make a big impact on your budget as well.
Most producers want to help make your songs the best they can be, but a bad deal with a producer can haunt you for a long time. The best way to prevent a nightmarish scenario is to understand how producers are compensated for their work so you can accurately evaluate the deal that's on the table. Get a handle on what advances, royalties, and recording fees all mean.
What Record Producers Do
The first step in the production process is listening to the artist's material and picking the best songs. A producer is looking for both commercial tracks—the elusive “hit song”—and album tracks. The artist and producer will go through the songs and hammer out arrangement ideas.
They'll look for areas where instrument parts are clashing, and for ways to make a song more memorable or catchy. Each track is an instrument—there's a track for a vocal, and there are others for guitar, bass, or kick drum. Overdubs are added, usually vocal tracks or guitars.
The next step is mixing—adjusting volumes and effects on each track and producing a stereo mix. This mix is then taken to the mastering house, where it's sweetened so it's less harsh. Compression is added to glue the mix together.
How Do Music Producers Get Paid?
Music producers' contract terms can vary considerably. Everything from the genre of the music to the bargaining power of the producer determines what kind of money they can demand. There are some generalities, however.
Producers have two main streams of income: advances and royalties.
A producer who's new to the business might receive no advance at all and work solely for the purpose of building a portfolio. Other producers get a per-song fee, based on their experience and success, the artist’s level of success, and the number of songs to be recorded.
The fee also can be influenced by whether the label is local or national, independent, or a major record company.
Some producers forgo advances and charge an artist a flat fee. This is a good way for new producers and new artists to work together in a cost-efficient way that helps both their careers.
The advance might include the actual recording cost when producers work in their own studios. This is sometimes called a fund deal. It's up to the producer to make it clear in the contract what percentage of the funds go to the advance and how much is considered a recording fee.
Recording fees aren't generally recoupable against producer royalties, but advances should be recoupable or subtracted from royalties ultimately paid to the producer, just as the name suggests. It's advance money that will technically be earned later.
Many producers receive a percentage of an artist's royalties earned on an album. These percentages are also called "points." One point equals 1%.
Traditionally, the royalty is based on how the artist was paid, which is typically a percentage of the record’s sales price multiplied by the number of CDs or downloads sold. The record royalty to the artist is around 15% to 16% of the sales price of the audio product.
The record royalty for a music producer is usually between 3% and 4% of the record’s sales price, or 20% to 25% of the artist's royalties.
Determining Sales Price
The sales price used to calculate royalties can take one of two forms: the suggested retail list price (SRLP) or the published price to dealers (PPD).
PPD is based on what distributors charge to dealers. It's effectively the wholesale price—which, of course, is less than retail. SRLP is based more on what the record store or website charges to the consumer.
Record One Royalties
Producers are typically paid "record one" royalties. They're paid for every album sold, unlike artists who only receive royalties after recording costs have been recouped.
Most producer contracts specify "retroactive to record one" clauses to make that clearer. The artist doesn't owe the producer any royalties until they or their label recoups their recording costs. The producer is owed royalties on everything sold going back to that first record, however, after the costs are recouped.
The Bottom Line
Never sign a deal you don't understand, and don't shy away from negotiating or getting a lawyer to negotiate a deal for you. Move on to another producer if you can't come to an agreement on advances, fees, and royalties.