What is a Record Label / Music Advance & How Does it Work?

Everything you need to know about advances

A Music advance is one option for funding your music career, learn more in this post.. 


What is a music advance?

A music advance is a payment given to artists to fund their career or to be used as early income while creating or promoting an EP or album. However, the money is not free.

While not technically a loan, an advance works in a similar way. It’s a purchase of a limited portion of your revenues until it is paid off by the royalties generated from the music

Historically, advances were only available for major label artists and established acts although this has now changed as private music investors are now offering advances to many more artists.

If you have 15k monthly streams on Spotify, you might be eligible for an advance of up to 8 x your streaming income, click here to find out more. 


How does a music advance work?

The advance historically has been provided as part of a recording contract but now there are new options for music funding without labels.

Record labels/investors provide the advance up front as a cash amount, and the band produces the desired album of songs in a recording. The band or musician can use the advance money as early income before they start to receive royalty income from the music they create.

The artist will not receive the full contractual rate for royalties from the recording until the advance is paid back or ‘recouped’. Artists recoup at different rates and every deal is slightly different, you can use this calculator to look at different options for taking an advance on your own music even without a label.


What is recoupment?

When the music album is finished and goes on sale to consumers, the record label starts to recoup the money they spent on the advance. The recoupment is the share of income the music label keeps from album sales made to recover the money originally provided as an advance. The recoupment comes out of the artist’s share of the royalties after all other agreed costs are paid back.

So, if a band was advanced $50,000 and the record sales are $500,000 after costs, the music label takes $50,000 off the top as the recoupment, and the remaining sales then only have a gross balance of $450,000 in available income to pay off any costs and then split with the band.

Once costs are paid and the advance is recouped the band will receive a split of future royalties from the track and whatever their agreed, contractual rate is.



Are advances and recoupment required?

Not every album recording contract includes a music advance and related recoupment terms. Oftentimes, bands and artists will never need an advance if they keep their costs low or have another strong revenue stream (like touring).

However, as artists become more successful, music advances can be a very helpful tool to help take artists up to the next level and to fund more ambitious projects.

If you are interested in learning more about funding your music career with an advance, click here


How to get an advance without a record deal

If you have more than 15k monthly listeners on Spotify, you might be eligible for an advance on your streaming income. Click here to find out more.