Music 101, Platinum Articles

#ChicagoMusic-Do you actually know what an advance is?


Hey Y’all!

It’s Your Gyrl, Ms. Carmen aka Platinum Voice PR bringing another relevant topic to you!

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Many recording artists work hard to get record deals, so they can receive big advances. Do you actually know what an advance is?

An Advance Is  . . .
An advance is a loan given by a business in the music industry to the company’s talent. For example, a record label will give an advance to its recording artists, or a publishing company will give an advance to its songwriters.

You Have To Pay It Back
When an artist receives an advance, it must be recouped from the artist’s record sales or another form of music industry income. A record label can now recoup their advance money from stage performances, music publishing and other forms of music industry income thanks to 360 deals.

What About Taxes???
If an artist is released from his or her contract before selling the album, he/she keeps the advance, and does not have to pay it back to the record label. The artist must pay taxes on the money now, since it is no longer a loan.

The Advance Options
When an artist receives an advance, the money is given to him in either one of two ways. They are:

  • Advance Option A: The Fund
  • Advance Option B: Spending Money

ADVANCE OPTION A: THE FUND

In this situation, an advance is called a fund. The advance takes into account paying for a recording artist’s studio time. Any money left over from the fund goes into the recording artist’s pocket as an advance. If there is no money left over after the recording costs, the artist does not receive any advance money.

For Example:

  • Example One: Recording Fund With An Advance
  • Example Two: Recording Fund Without An Advance

Example One: Recording Fund With An Advance 
A recording artist gets a recording fund of $350,000. The total recording cost for the artist’s album is $250,000. The artist would receive $100,000 as his advance because:

  • $350,000 (recording fund) – $250,000 (total recording cost) = $100,000 (artist advance)

The artist receives an advance of $100,000, since it is the amount of money remaining after paying the studio cost.

Example Two: Recording Fund Without An Advance
A recording artist gets a recording fund of $400,000. The total recording cost for the artist’s album is $400,000. The artist would not receive an advance because:

  • $400,000 (recording fund) – $400,000 (total recording costs) = $0.00 (artist advance)

Not Always This Easy!!!
In some situations, the recording costs are higher than the recording fund. The recording fund is the recording budget. When the recording costs are higher than the fund, the project is over budget.

What A Decision
The record label must decide if it is going to pay the remaining recording costs to complete the album when the project is over budget. The artist will usually not get an advance if the record label decides to pay to complete the album, since the project is already over its current budget.

ADVANCE OPTION B: SPENDING MONEY

It is when a record label gives an artist a specific amount of spending money as the artist’s advance. If the artist receives a $50,000 advance, the artist keeps $50,000. If the artist receives $8,000, the artist keeps the $8,000 advance as spending money.

THE MILLION DOLLAR ADVANCES!!!
When artists receive very large advances, they usually do not keep all the money. The advance does not only include recording costs but promotions and marketing costs in most situations.

For Example . . . 
An artist receives a 25 million dollar advance for five albums. The artist will receive a five million dollar advance for each album because:

  • $25,000,000 (total advance) / 5 (total albums) = $5,000,000 (advance money per album)

Wait A Minute!
The artist will not keep five million dollars on every album release. The artist will usually receive a six figure advance. The rest of the money will be used to create, market, and promote the album. The large advance number just lets the artist know that he/she will have money invested into creating and promotion his or her album.

The artist knows that he or she is a priority on the record label.

Source: Learn the Industry.com

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