If a Label Owns Your Masters; Why Not Get Paid 100% Royalties?

So an artist and indie label owner brought this point up on Threads as a sort of a gotcha moment because many people in the comments were obviously stating why that couldn’t work and then he responded with, “tells me everything I need to know, just watch me because I’m about to do just that”. He also mentioned people having a lack of music industry knowledge. Threads is sensationalist on purpose, we need engagement and views. The point he was making was that this structure and concept is possible. So he decided to start doing collaborative releases where his collaborators receive 100% royalties. 

Okay but sensationalist tactics and semantics aside, it got me thinking. There’s actually no reason why that couldn’t work in myriad ways. Think about ownership for a second when it comes to historically traditional label deals, not the deals you think you understand because of an indie famous minority. The typical deals that artists used to see were basically 6-13 cents on every dollar per album after expenses and recoupments. Now that's a rough valuation based on all the music industry information out there available about recording contracts. Here’s why the 100% royalties is an interesting proposition, especially for heavily contracted label artists. 

Imagine a deal where after the 1 million dollar advance was recouped, the expenses for marketing, touring, etc are all paid back. A label could essentially keep an artist indefinitely happy with 100% royalties while owning and exploiting everything else. Lets break down the math further; in a standard deal, a 1M advance, on a 10 point split, means you’d sell 1 million dollars worth of records. After selling a million dollars worth of records, because of your 10% split and how the label has an interest based structure, you technically have only paid back 100k because your recoupment has to be paid off through the artist portion (that's draconian but we’ve seen it a lot). So in theory, an actual successful artist is one that gets the 1M USD advance that goes on to sell well over 10 million dollars worth of records. The latter artist recoups fully once selling 10M USD on a 10 point artist split. The equation is “Required Sales to Recoup” = Advance Amount/Artist Royalty Rate. 

A shotgun blast of a breakdown but it will be well worth it to highlight my point. Okay so now keep in mind that the hypothetical artist has fully recouped the entirety of his contract. Now the contract kicks in a 100% royalty rate. (So how does the label make money?! They’re giving 100% royalties to the artist?!) Well yes and no. A major label in this hypothetical would retain ownership of all masters but the artist would be entitled to earning 100% of generated mechanical streaming royalties every quarter, every payout. This is way more of an attractive concept than having to sell 10 million dollars just to recoup, and then after recoupment you’re still only making 10 points on every album sale? Just give the artists 100 points after recoupment. Here’s how this would look ideally. 

The hypothetical artist isn’t broke anymore, fully recouped. Cash flow in the tens to hundreds of thousands every quarter. Maybe the contract is up, maybe its not. The label still retaining ownership would make 100% of all sync licensing, radio spins, they could take earnings on any sponsors, portions of tours, portions of merchandising, portions or full ownership on literally every possible revenue stream, but the artist earns 100% of mechanical streaming royalties. Now tell me major label artists wouldn’t be satisfied with that (assuming they were already in an impossible deal structure)? Actually don’t let the labels know this they might do it and keep the artist forever, kidding. 

In all seriousness, especially after recoupment, there’s no reason a label should be taking any amount over 50 points per record sale. It’s ludicrous and extortionary. So after reading this artist and record label owner’s thread about 100% royalties, it made me realize its completely realistic especially in the context of a major label recording contract. 

If you enjoyed this article, please follow the links below to stream my recorded music catalog!

https://open.spotify.com/artist/1zTmNMohQzhh4oFNUIbuh9