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Producer Points
Old 31st January 2009
  #1
Gear Addict
Producer Points

Hi there,

Not sure if I'm posting this in the proper section.

I'd really appreciate it if someone can answer my question (excuse my ignorance on the subject)

It is my understanding that typically producer's points are paid on the MSRP of mechanical sales (CD sales or downloads) of the recording, as well as any licensing deals associated with the song(s) (ie.. if used in film/television). I assume that the producer points are not paid on any songwriting royalties that the artist recieves, since it only applies to the recording that you produced and not to covers of the song by other artists. My question is whether producer points are usually paid on the music publishing income/royalties?

Thanks in advance to anyone that can shed some light on this,
Jon
Old 31st January 2009
  #2
Gear Addict
also, are producer points usually paid only after the artist has recouped the recording costs?
Old 31st January 2009
  #3
High End Moderator
 
mwagener's Avatar
In general, if there is no special deal going, producers points are paid from actual sales. They are calculated of the net retail price, which is a floating price to say the least.

The way it is normally set up (or at least was when the industry was still halfway sane):
The artist (with an artist deal at a label) gets anywhere from 10 to 20 % (points) of the net retail, which could be anywhere from $7 to $18 depending on the the deal the label has with distributors and a million other things. Out of the artist points he/she pays the producer's points.

Lets say for numbers sake and very much simplyfied:
the artist gets 13%, and out of that he/she pays the producer 3%, so he/she is left with a net artist rate of 10%. The net retail price for numbers sake, is at $10. That means the producer would make $0.30 per actual CD sold. The artist would make $1 per actual CD sold.

Here comes the hitch:
Royalties are normally paid retroactive from sale of unit one, after the "Recording Cost" are recouped. Recording cost (which include anyting to do with making the album, except for producers advances) are recouped at the "net artist rate" which in our example is 10%. So, again for numbers sake: Let's say the record cost $100,000 to make. The artist would have to sell 100,000 units to recoup the recording cost. At that time everybody would start to get paid royaties, BUT retroactive to sale of unit one. In other words, as a producer you would not see a dime until CD 100,001 is sold but then you would get $30,000 right away, plus whatever sales over 100,000 are accounted for, minus all the other contractual deductions for reserves, returns, packaging etc. etc. etc. The artist would get paid $100,000 at that point, minus any advances he/she got to survive during the making of the CD. If the producer got any advances for the project, he/she would have to recoup those first. In our examle above: if the producer got an advance of $20,000, he/she would get paid $10,000. After recoupment there should be a 3 month or 6 month statement, hopefully with a check attached.

The producer has no right to any Publishing royaties, unless he is part writer of a song or the artist "gives" him writing credits for his work on the songs. I never ask for publishing, but leave it completely up to the artist to include me in it, if they feel I contributed enough to a song to make a difference. Publishing is about the only money an artist will make for a while (other expenses like touring, or a video shoot will eat up any royalties), and since they have to be able to exist, otherwise they can't tour and sell CDs, I advise every artist to not let anybdy touch their publishing (and merchandising for that matter). Also, publishing is paid from sale one and is not reliant on recoupment of the Recording Cost.

All that said, you can imagine it takes a upwards from 50 pages contract to nail this down (especially since royalties are at a different rate in different countries), so I changed my royalty system to $0.0X per song sold, very simple, the artist sells a song (download or CD) and I get paid $0.0X. Makes for a one page contract.

This is a very simplified exlanation of the whole deal, but I hope this helps.
Old 31st January 2009
  #4
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gainreduction's Avatar
 

Brilliant post Michael, the royalty jungle simplified.

You should put this up somewhere where it´s easy to find, this question gets asked now and again.
Old 31st January 2009
  #5
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vincentvangogo's Avatar
 

Quote:
Originally Posted by mwagener View Post
... So, again for numbers sake: Let's say the record cost $100,000 to make. The artist would have to sell 100,000 units to recoup the recording cost. At that time everybody would start to get paid royaties, ...
Surely it would take sales of nearer 10,000 units for the label to recoup costs of $100,000?
Old 31st January 2009
  #6
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mac black's Avatar
Quote:
Originally Posted by vincentvangogo View Post
Surely it would take sales of nearer 10,000 units for the label to recoup costs of $100,000?
Yes but that's the catch with a recording contract ... the artist can only recoupe from his own share so although a record label gets $10 per sale, the artist share of that is $1.3 (if we base it on a 13% deal), meaning, the artist has only recouped $1.3 and $8.7 is the record company's profit so in order to recoupe $100k you need to sell closer to 1,000,000 units ....
Old 31st January 2009
  #7
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vincentvangogo's Avatar
 

Quote:
Originally Posted by mac black View Post
Yes but that's the catch with a recording contract ... the artist can only recoupe from his own share so although a record label gets $10 per sale, the artist share of that is $1.3 (if we base it on a 13% deal), meaning, the artist has only recouped $1.3 and $8.7 is the record company's profit so in order to recoupe $100k you need to sell closer to 1,000,000 units ....
God, the music business sucks.
Old 31st January 2009
  #8
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p_bro's Avatar
 

dont forget digital sales!!

Since the times are changing, be sure that your producers point are well defined for all the digital format sales, not only for the cd's.
And for all this stuff (mp3, etc) things always get a bit more complex, since the points are most of the time different for each territory (or country), and of course, with itunes the territory is pretty much the world...
Anyway, be sure to read every line of the contract and ask somebody to double check it.
Old 31st January 2009
  #9
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Quote:
Originally Posted by mac black View Post
Yes but that's the catch with a recording contract ... the artist can only recoupe from his own share so although a record label gets $10 per sale, the artist share of that is $1.3 (if we base it on a 13% deal), meaning, the artist has only recouped $1.3 and $8.7 is the record company's profit so in order to recoupe $100k you need to sell closer to 1,000,000 units ....

hi,

i think you have an extra zero there.

also, i am not sure what your word "recoupe" is referring to.

a record company generally recoups its initial recording expenses from an artist. the artist reimburses.


rights.
Old 31st January 2009
  #10
Here for the gear
 

"The producer has no right to any Publishing royaties, unless he is part writer of a song or the artist "gives" him writing credits for his work on the songs. I never ask for publishing, but leave it completely up to the artist to include me in it, if they feel I contributed enough to a song to make a difference."



You sure about that? Always thought with a song...your suppose to look at it as 100%. 50 for songwriters.....50 for producers. Depending on the artist and their pull, they will take from that 100% whether they helped write the song or not. So...how are you working on a song in a producer capacity, but leaving it up to them on if you get your publishing or not?
If I produce a song...THE ONLY thing we negotiating is if im going to recieve my full mech rate or a cut rate. I may be wrong in my thinking.....others chime in please.
Old 31st January 2009
  #11
Gear Nut
 
Tony"CD"Kelly's Avatar
 

Whoever writes the song (lyrics, melodies and composer) gets the publishing. The producer gets publishing if he's one of the writers (most producers now does)

Bless thumbsup
Old 31st January 2009
  #12
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My Bad

Looks like I got it mixed up. I have to remember that in the hip hop/rnb genre the term "producer' has somewhat changed and is almost synonymous with "musician". So nowadays most producers are the actual writers of the material. Gotcha now..heh
Old 31st January 2009
  #13
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doubledecker's Avatar
[quote=mwagener;3869568].


Out of the artist points he/she pays the producer's points.

Lets say for numbers sake and very much simplyfied:
the artist gets 13%, and out of that he/she pays the producer 3%, so he/she is left with a net artist rate of 10%. quote]




This sounds odd to me.
I have never received producer points from the artists themselves.
I have allways negotiated production deal with the record company and never ever were my points in any connection to artist points.
As far as i am concerned artist can get zero points.
I will get my 3 or 4 in any case.
Artist points and producer points are two separate things.
Or maybe i didnt understand what you were saying
Old 31st January 2009
  #14
Here for the gear
 

I thought artist points and producers points were related. Up to the record label if the points getting paid to producers are taken from the artists points, or are in addition to them. In other words....if the artist gets 10% and they have negotiated 3% for producers on the album, then the artist would be getting 7%. Unless the artist has some pull and can get the producer points to be in addition to theirs. Once again..lol I may be wrong, but this has been my understanding.
Old 31st January 2009
  #15
High End Moderator
 
mwagener's Avatar
Quote:
Originally Posted by doubledecker View Post
Quote:
Originally Posted by mwagener View Post
.


Out of the artist points he/she pays the producer's points.

Lets say for numbers sake and very much simplyfied:
the artist gets 13%, and out of that he/she pays the producer 3%, so he/she is left with a net artist rate of 10%.



This sounds odd to me.
I have never received producer points from the artists themselves.
I have allways negotiated production deal with the record company and never ever were my points in any connection to artist points.
As far as i am concerned artist can get zero points.
I will get my 3 or 4 in any case.
Artist points and producer points are two separate things.
Or maybe i didnt understand what you were saying
Actually the label only really pays one set of points to the artist and then producers points come out of that. The artist will send a letter of direction to then label (part of the 50 page contract) which states the the artist wants the label to pay the producers portion of the points directly to the producer so the artist doesn't have to deal with the accounting. The labels have no obligation to pay the producer directly if they don't want to, producers points are the artists responsibility. The label might negotiate the distribution of the points, after all they have to agree to deal with the producer directly.

Also, the producers points are usually based on the rate the artist gets. In other words, if the artist gets 1 point less in China, the producers royalty rate will be reduced by the same amount, if the artist royalty rate has a packaging or shipping reduction in it, the producer gets the same reduction.

Agt least that's hosw it was handled in about 75 major label contracts I signed. The independents might have different rules.
Old 1st February 2009
  #16
High End Moderator
 
mwagener's Avatar
Quote:
Originally Posted by p_bro View Post
Since the times are changing, be sure that your producers point are well defined for all the digital format sales, not only for the cd's.
And for all this stuff (mp3, etc) things always get a bit more complex, since the points are most of the time different for each territory (or country), and of course, with itunes the territory is pretty much the world...
Anyway, be sure to read every line of the contract and ask somebody to double check it.
That's why I negotiate a set $ rate per song, download or hardcopy sales, doesn't matter. You sell a song anywhere in the world or the rest of the Universe, I get paid my $0.0x
Old 1st February 2009
  #17
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doubledecker's Avatar
@mwagener

It must be US thing then.
I have signed contracts with BMG,Universal,Zomba,Alabianca etc in Germany, Netherlands,Italy, so with both major and independent companies.
I was usually approached by the record label not the artist, though.
So i've never had displeasure of negotiating deals with artists,thank God.
Do you really have to negotiate your royalties with artists?
My goodness i cant even imagine the hassle
Old 1st February 2009
  #18
Motown legend
 
Bob Olhsson's Avatar
 

Quote:
Originally Posted by mac black View Post
...although a record label gets $10 per sale, ...
Lots of label folks would sure love to know where in the world a label gets paid $10 a copy! Net retail includes the store's markup and the amount paid for songwriting and music publishing. Typical payment to a label is $6 or even less if the store is being offered some kind of break for prominent display. Out of that they have to pay artists' royalties, music publishing, manufacturing, shipping and here in the U.S. be willing to refund any unsold copies a store sends back.

The median major label "deal" is a 50-50 split between the label and the combination of the artist and songwriters. It will be higher or lower depending on the artists' negotiating position and the size of any advance. The artist pays all production expenses out of their royalties while the label fronts the production expenses, advances on royalties and all of the stock sent out to stores. In addition they pay for the lions' share of all advertising, publicity and promotion. On top of that they take a bath on every album that for one reason or another nobody wants to buy.
Old 1st February 2009
  #19
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johnnyjellybean's Avatar
 

Quote:
Originally Posted by Bob Olhsson View Post
Out of that they have to pay artists' royalties, music publishing, manufacturing, shipping and here in the U.S. be willing to refund any unsold copies a store sends back.
Mechanicals have nothing to do with publishing which is collected and paid to the publishers by performing rights organizations.
Old 1st February 2009
  #20
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druhms's Avatar
Hey Michael,

What's it called when the labels shave off the top 5% - 15% for damaged goods and promotional units?
Druhms
Old 1st February 2009
  #21
Here for the gear
 

I work in royalties for one of the majors and Michael Wagener is spot on except that some labels have moved to a wholesale model. Rates are now based on wholesale dollars as opposed to retail dollars. The actual rate percentages have been reevaluated in the new wholesale contracts to offer the artist equivalent earnings to those found in retail based contracts. With all the formats and price points available today, it's more efficient for the label to compute based on the wholesale dollar.

It's a complicated process but it's my advice that all producers do their homework as Michael has done. Knowing the process is an important aspect of being a professional producer and/or mixer. It's not all in the gear...
Old 1st February 2009
  #22
Moderator
 
narcoman's Avatar
 

Quote:
Originally Posted by Bob Olhsson View Post
Lots of label folks would sure love to know where in the world a label gets paid $10 a copy! Net retail includes the store's markup and the amount paid for songwriting and music publishing. Typical payment to a label is $6 or even less if the store is being offered some kind of break for prominent display. Out of that they have to pay artists' royalties, music publishing, manufacturing, shipping and here in the U.S. be willing to refund any unsold copies a store sends back.

The median major label "deal" is a 50-50 split between the label and the combination of the artist and songwriters. It will be higher or lower depending on the artists' negotiating position and the size of any advance. The artist pays all production expenses out of their royalties while the label fronts the production expenses, advances on royalties and all of the stock sent out to stores. In addition they pay for the lions' share of all advertising, publicity and promotion. On top of that they take a bath on every album that for one reason or another nobody wants to buy.
absolutely !!! PPD these days is running around $4.... And that's before the big supermarket discounts.....
Old 1st February 2009
  #23
Gear Addict
thanks Michael and everyone else for the very informative comments on this complicated issue.

I like the idea of a simplified contract with a per song producer rate. I'd be really curious to know about how much that amount is. If it's not imposing/personal, etc... even just a rough idea of the ranges that Michael or anyone else that might use this type of contract charges (ie..$0.02 - $0.05 per song download/CD sale). Obviously this would vary dramatically depending on the producer's experience, input, etc... I'd just like a ball park idea

thanks again,
Cheers,
Jon
Old 1st February 2009
  #24
High End Moderator
 
mwagener's Avatar
Quote:
Originally Posted by captainj View Post
thanks Michael and everyone else for the very informative comments on this complicated issue.

I like the idea of a simplified contract with a per song producer rate. I'd be really curious to know about how much that amount is. If it's not imposing/personal, etc... even just a rough idea of the ranges that Michael or anyone else that might use this type of contract charges (ie..$0.02 - $0.05 per song download/CD sale). Obviously this would vary dramatically depending on the producer's experience, input, etc... I'd just like a ball park idea

thanks again,
Cheers,
Jon
Can't really give you any hard numbers, but if you assume a producers royalty between 3 - 5 points form a net retail price in the range of $10 - $15, you end up somewhere between $0.33 and $0.75 for a full CD. Divide that by the number of songs on the album and you get an idea.
Old 1st February 2009
  #25
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mwagener's Avatar
Quote:
Originally Posted by aiff View Post
I think about this sometimes. How on Earth do you keep track of sales when they are digital ? I had a hard enough time (and caught a few labels seriously "at it") when it was in the physical format.

When it comes to digital downloads, (as an artist) it seems just about impossible to confirm / prove.
It's pretty much impossible and you're at the mercy of the label's reporting system.

I have had done a few label audits in my life and always walked away with a substantial amount that the label owed me. In one case the auditors found around $500,000 that was owed to the band (not me) for unpaid sales over a period of 2 years.

That said, the accounting from a band direct is much worse than that from a label, mostly because they really don't know how.
Old 1st February 2009
  #26
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mwagener's Avatar
Quote:
Originally Posted by druhms View Post
Hey Michael,

What's it called when the labels shave off the top 5% - 15% for damaged goods and promotional units?
Druhms
Not sure what it's called, but as far as I know you get paid only on 90% of all sales because of damaged goods. I had a clause in my contracts that the label could not give away more than 10% as free or promotional goods. If they gave out more, they still had to pay me.

This whole thing is totally out of hand, because no matter what you put in your contract, you'll forget something, impossible to think about everything. Normally I got an escalation of 1/2% after the sales of 500,000 units and another one of 1% after the sales of 1,000,000 units. On one (big) album I overlooked a clause that the escalation would only be paid on the sale of "black vinyl records", right at a time where they only pressed 30,000 black vinyl records but about 5 million CDs. No escalation for me on that album, that oversight cost me close to 1 million $$s in Royalties

That's why I try to go with the simplified version.
Old 1st February 2009
  #27
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mwagener's Avatar
Quote:
Originally Posted by doubledecker View Post
@mwagener

It must be US thing then.
I have signed contracts with BMG,Universal,Zomba,Alabianca etc in Germany, Netherlands,Italy, so with both major and independent companies.
I was usually approached by the record label not the artist, though.
So i've never had displeasure of negotiating deals with artists,thank God.
Do you really have to negotiate your royalties with artists?
My goodness i cant even imagine the hassle
Actually I much rather negotiate with an artist than with a label
Old 1st February 2009
  #28
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mac black's Avatar
Quote:
Originally Posted by oky**** View Post
hi,

i think you have an extra zero there.

also, i am not sure what your word "recoupe" is referring to.

a record company generally recoups its initial recording expenses from an artist. the artist reimburses.


rights.
hey
Yeah you're right what i meant to write ( which i don't usually, obviously heh) is that in order to recoup $100k , you first need sell $1,000,000 worth of your music (a bit less if we base it on a 13% deal)...
And as to recouping, a record company recoups the advances, recording costs, and usually 100%-50% of a video and they do try to add some of the marketing expenses on top.

I always like to give round figures when trying to talk royalties, its easy to understand

I also agree with Michael , its easy to overlook a silly point in your contract that could potentially cost you millions ... hence why we all need a clever music lawyer !! at least they don't take royalties ...
Old 1st February 2009
  #29
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picksail's Avatar
 

Really sage advice here Michael!
Old 1st February 2009
  #30
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surflounge's Avatar
Here's a quick spreadsheet PDF from some experience
Attached Files
File Type: pdf costs.pdf (38.8 KB, 1230 views)
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