Many artists aspire to be signed to their dream label, independent or major. Some still view this as the pinnacle of success in the music industry.
Being signed has certain advantages, though most are unwilling to do a whole lot for you unless they see you as being a viable money-making opportunity. If they don’t think you’re going to reach critical mass and turn a profit for them, they’re unlikely to take a chance on you to begin with.
But let’s say you do everything right in your career as an independent artist, and a label (or multiple labels) wants to build a relationship with you and offer you a contract.
How much of an advance would they give you for your first project? Is there a certain amount of money you should try and get as an artist? What is an advance, and how should it be managed?
Here’s what you should know about record label advances.
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Contents
This Is How Much A Record Label Typically Invests In A New Artist
Per IFPI, a record label will typically invest anywhere from $500,000 to $2,000,000 in a newly signed artist. That’s a wide spread to be sure, and a large amount of money from the perspective of most.
Here’s the basic breakdown of how these funds are allocated:
- Advance: $50,000 to $350,000.
- Recording: $150,000 to $500,000.
- Video production: $50,000 to $300,000.
- Tour support: $50,000 to $150,000.
- Marketing and promotion: $200,000 to $700,000.
As you can see, it’s possible to get as much as $350,000 as an advance. But it could also be as low as $50,000. Depending on the contract, you may be offered less or more. In some cases, you won’t be offered anything at all.
It’s tough for musicians to make it by on their own money and build a successful career. This is the main reason artists tend to seek representation. They would love to hand over the business side of music to focus on the creative side. But the reality is that an advance may not relieve their financial pressures, but rather add to it (more on that later).
Labels will consider a variety of factors to come up with an advance figure for you. For major labels, a good chunk of it is dependent on how much they intend to spend on marketing and promotion, as well as how much money they think they can recoup.
Smaller, independent labels generally do not have the same cash flow major labels have. So, while they may offer to pay a substantial advance just to sign you (especially in a bidding war), it’s often better to take a smaller advance so they have a bigger marketing budget to work with. After all, you do want your upcoming release and tour promoted, don’t you?
It’s fair to say most labels don’t want to lose money. There are reasons why this can’t happen, but in most cases, they are going to err on the side of caution and offer you less rather than more. Expect to be lowballed, especially if you don’t have a proven track record.
How Much Advance Should You Try And Get?
Getting an advance might feel like striking gold. But an advance is not a license to do whatever you want. It’s better to think of it as credit. And, if you’ve ever been in financial trouble, you know that credit is expensive. The inability to pay off your debt can be quite stressful. Effectively, when you're given an advance, you’re being given money to produce art that makes more money.
The above stats might offer some clues as to how much you should try to get as a newly signed artist. In an instance where there’s a bidding war between labels who want to sign you, you may be offered a larger advance. And, generally, it’s okay to accept it because they feel confident about your future as an artist.
And, if you are offered a lower advance, it’s not necessarily an insult. It could be that the label wants to spend more in certain areas to ensure your release is properly promoted and results in streams and sales. If a label offers no advance, there’s probably a good reason for that too.
Asking for too much of an independent label might be a mistake, for reasons already explored. They might offer you more just to sign you (especially in a bidding war), but they might end up not being able to market your release due to lack of funds, which is bad for both sides.
Don’t get me wrong – It is possible to negotiate your contract. For best results, work with an experienced and qualified entertainment lawyer. Not only can they help you understand what you’re buying into, they can push the label to reveal how they came up with their advance figure. In some cases, this may help with forcing the hand of the label, and they could end up offering more or renegotiating. Either way, you’ll get a better sense of how they arrived at their numbers.
Ultimately, you can take a higher advance if everyone believes you’re a success in the making, and there is a good reason to believe you will do well. Taking a lower advance might also be a strategy worth considering, especially if you want to ensure the label spends where it counts. Regardless, if you take too big of an advance, you might end up shooting both yourself and the label in the foot.
The best strategy is to adopt a long-term mindset and consider how things will pan out. Don’t be blinded by the short-term opportunity. See what could be accomplished given a fair shake.
Note that in some cases you won’t be offered much of an advance at all, in which case you might refuse the contract / record deal, or consider the terms carefully before signing. Look at what the label is planning to bring to the table. If nothing, you might be better off continuing your merry way as an independent artist.
At base, you should aim to break even. If you do, you probably won’t maintain your signed status, but at least you won’t end up owing the label, and you might still have a music career afterwards.
And make no mistake – labels are not looking to give you free money. If you want to remain with the label, then you should do what you can to help them make money on your upcoming release and tour. It seems like commonsense, but you’d be surprised by how many artists don’t understand this.
Why Would Labels Offer Artists An Advance In The First Place?
Labels understand what it means to be an artist, at least to an extent. They are more adept at the business side of music, and less adept at the creative side, which is the responsibility of the artist.
They recognize that artists prefer to work on their music. Advances are given so artists have time to write, rehearse, record, perform, and so on.
It doesn’t make much sense for the artist to concentrate on marketing when the record label is far more adept and capable. This isn’t to suggest that record labels don’t expect artists to market themselves at times, because they totally do depending on the contract. But they also know there can be some benefits to freeing up artists to work on their craft and concentrating on the product instead of being distracted by dozens of other duties. After all, earnings from the product are supposed to exceed expenses.
In most cases, labels offer artists an advance because they believe they can make money on the artist, plain and simple. They are unlikely to take too many chances on unproven acts.
Understand The Risks & Make Wise Decisions
Labels will take calculated risks. But this doesn’t mean they won’t make some mistakes. Their risks may not pay off, and the artists they sign could flop. But that’s not their problem, in a sense, because if they don’t recoup their costs through streams and sales, they’ll find other ways of getting their money back. Typically, this means going after the artist for the difference.
So, an advance is basically just a vote of confidence. It’s not a label saying, “you’ve made it – you’re bound for success.” It’s a label saying, “we think you might do well, and we’re going to take a chance on you.” Again, it’s usually a calculated risk they're taking, not a risk with a huge downside. They’re not going to consider an artist with no potential to begin with.
An advance is not free money. It’s more like credit. And, as you know, credit usually has a high interest rate.
There are risks no matter how you look at it. Yes, you might have a good chance at mainstream success. It’s not beyond the realm of possibilities that you have the goods the market wants. But you could also fail, even if you are awesome in every regard. So, do not assume success or you may be severely disappointed.
You can take an advance if you’re happy with the contract you’re offered. I’m not going to discourage you from doing so. But you should be aware of what could happen if you can’t help the label recoup their costs. This could be a painful for you, because you will lose your signed status and end up owing a lot of money too. This would be more than a minor setback, and some artists never come back from it.
Understand The Nature Of Investments
When a record label gives you an advance, they are investing in you as an artist. If you know anything about investments, you know that not all investments pay off. It’s impossible to bat 1,000 in investments. Not even Warren Buffet does, and he is arguably the world’s most successful investor.
That’s where the idea of calculated risks comes in. Labels want to ensure most of their risks pay off. Some won’t, and they know that. The music industry is more saturated and competitive than ever. But they still want to succeed as much as humanly possible.
Record deals are set up in such a way that the label takes minimum risks. If their investment doesn’t pay off, at least they’ll get their money back. So, while they aren’t always in a position to win, they are rarely in a position to lose. Overall, the record label model is getting harder to sustain, especially in today’s digital world, so losing too much money would spell disaster. Sometimes, they still lose money, but not a lot.
If you understand how investments work, it will put the idea of advances into perspective. I already said it, but it’s worth saying again – it’s not free money. See it as a loan or credit. See it as money that can help you concentrate on the creative aspect of your career for a period of time. Do not look at it as your ticket to fame and fortune, or as a hall pass to party.
Final Thoughts
Just as a label carefully considers how much to offer you as an advance, you also need to consider every opportunity that comes your way with care. You shouldn’t accept any and every deal or offer presented to you. That’s a sure way to end up signing a contract you might regret. Sometimes you can earn way more in a successful indie band than if you were to turn it all over to a label.
An advance isn’t about how much you can get, though it might be tempting to think of it that way. For many artists, being courted by a label spells success. But that isn’t necessarily the case, and most contracts probably aren’t written in your favor. If you’re thinking that signing to a label might be the best move for your career, enlist the help of an entertainment lawyer to comb through the terms and details. Be aware of exactly what you’re getting into before making a commitment that could tank your career later.
P.S. Remember though, none of what you've learned will matter if you don't know how to get your music out there and earn from it. Want to learn how to do that? Then get our free ‘5 Steps To Profitable Youtube Music Career' ebook emailed directly to you!
Sources
- http://www.ifpi.org/how-record-labels-invest.php
- https://www.thebalance.com/how-does-a-record-label-decide-advance-2460963
- https://www.thebalance.com/should-i-ask-for-a-big-advance-2460669
