Advances, also known as “advance deals”, are considered a common practice in the music industry, but not all artists are aware of their characteristics, and this is very important, since accessing them can be the key to the success or failure of a professional career in the music industry.
What is an advance deal?
An advance, in the context of the music industry, is a sum of money given to an artist or producer at the time of signing a contract.
This money is intended to support the artist during the creative and production process, from paying for the recording of the works to supporting the artist to have more time to compose new songs.
However, it is important to keep in mind that all the money advanced at the signing of the contract will have to be returned to the entity from which it was issued. We could say that it is a loan that the artist returns with a percentage of the royalties generated by the works signed within the contract.
How do advances work?
The agreements involving a financial advance are usually very different and always depend on the situation of the artist’s musical career and the company with which the contract is being made.
However, in traditional deals, artists generally assign a percentage of the royalties generated by their works during the term of the contract to the entity that provides the advance (which may be a major or independent record label, a distributor or a technology company such as Republic Network). Note that, initially, they usually retain 100% of the royalty income until they have recovered the initial advance.
Mainly, what you have to be clear about is that, although it may seem like a loan, if at the end of the contract the company has not finished recovering the monetary advance, you will not have to pay it “out of your pocket”, since it can only be collected through royalties.
In this sense, we recommend that you pay attention to the conditions of each entity when signing an advance contract in order to choose the requirements that best suit both your financial situation and your music.
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Types of music advances
There are different types of advances in the music industry, depending on the company you decide to sign a contract with:
1. Record label advance
Often, when preparing a contract with a record label, an advance is presented to the artist as a fundamental element of the agreement and is based on the projected success of the works.
Therefore, these types of contracts normally go through a “recovery” process which implies that the artist will not receive the income generated by his royalties until the record company has recovered the total prepayment.
2. Publishing advance
Advances from publishers or music publishers usually appear in co-publishing agreements. These agreements, for the most part, are split 50/50 between the publisher and the author. As with a record label, the author will not receive his royalty income until he reimburses the publisher in full.
Once the devolution is completed, the profits from the works are distributed according to the percentage agreed upon in the contract between the author and the publisher.
3. Advance from Performing Rights Organizations
Performance Rights Organizations (PROs), which play a key role in the collection and distribution of performance royalties, may also grant advances to artists.
Although it is not as common a practice as it is for record labels or music publishers, it is possible that organizations such as ASCAP, BMI or SESAC may decide to offer a prepayment to artists or authors who have a contract with them, maintaining a similar operation to that explained with other types of companies in the music sector.
4. Royalty advance
A royalty prepayment, also known as a Royalty Advance, can be made independently, without the need for a music publisher or record label, depending on the agreement.
This initial investment, as is commonly the case with record labels, is determined on the basis of an assessment of the future performance of the music. Such a prepayment is not tied to the underlying royalties and can therefore be a good option for authors who want to access financing for their projects without losing authorship over their works.
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Other ways to finance your music project
There are other ways to finance a creative project without the need to sign a contract with a company:
If you have the opportunity to sign a contract that involves a financial advance, it is worth considering whether the decision is right for you based on the phase you are at in your music career, the company you are signing the contract with and the future projects you have in mind.
And most importantly! Before signing an agreement, you should always consult with a lawyer to make sure that everything is correct and, therefore, that you will feel comfortable working in the long term.
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