How to Sell 1 Million Records and Owe the Label a Half Million!

It is amazing but true.  Many recording artists sell thousands of albums and have yet to receive a penny in royalties from the recording industry.  It’s all in the contract that one signs with the recording company.


Lets say you sell 1 Million Albums at a retail of $20 each at retail is your royalty 10% of the retail price (not a chance) you will get the figures from the wholesale price about half $10.. You’d think you’d get 1 Million, but you forgot the other clauses in the contract.  The signing fee that you get up front .. say $300,000 (that is to be deducted from future royalties) it is just a loan, not a bonus.


Then there is the old breakage clause (this is from when records were on vinyl and cellulose and not ‘online  digital sales’ or current CD’s which are a lot less prone to breakage but the same percentage rules apply.The labels still try to get a super high breakage rate that they get to deduct. For them, it’s pure profit. Then there are "uncollected account" withholdings, on the basis that some retailers go bankrupt and don’t pay for the stock they had. The way it’s described here, that’s often just a set number, rather than based on any actual, documented cases of uncollected fees. Next up? "Free goods." Now, we talk about the importance of free goods all the time. But here it’s used in a different manner. Basically the labels deduct the "cost" of providing reviewers/radio stations/etc. with "free" copies of your album. That money comes straight out of the gross that the royalty is calculated on. The fact that you could just email the mp3 to those folks yourself? Well, pay no attention to that newfangled technology.  Also don’t forget you don’t own your own music, the Record Company owns it..

Then we come to container charges.. how they can place a price on a container of digital media I have no idea. It is still a percentage of the album cost roughly 30% of revenue.

They also have another charge called ‘reserves’.  Which is simply a way to hold money back.. the longer money sits in my pocket the more I can make with it rather than give it to you..

This wonderful 10% of wholesale price seems wonderful, but don’t forget any money spent making the record also comes out of your pocket (royalties) as well.. When you dig in to things like this, you can understand how artists like Lyle Lovett can say they’ve sold 4.6 million albums and never made a dime in royalties from album sales.

A recording attorney spells it out in his video

Every artist should know these pitfalls and get them out of the recording contract.