Usually, a producer is paid by the hour, by the number of master recordings completed, or a flat fee. He or she probably will ask for a royalty from the sale of the record as well. If you agree to such an arrangement, you’ll have to account to the producer and make regular royalty payments, based on record sales. These issues must be agreed upon in advance and laid out in a written contract. As always, it is recommend to consult with an entertainment attorney to provide guidance in drafting and/or negotiating this contract.
The producer’s up-front fee will vary (usually from #10,000 to #500,000 per song), based on his or her experience and success, your artist’s level of success, and the number of songs to be recorded. The fee also can be influenced by whether the label is a local, national independent, or major record company. “Producers of tracks,” will receive an additional royalty, because they create the original music to which artists add vocals. Ultimately, the producer you and the artist select will depend on the artist’s musical style and naturally, on the budget.
Most producers want to help make your songs the best they can be, but a bad deal with a producer can haunt you for a long time. The best way to prevent a nightmarish scenario is to understand how producers are compensated for their work so you can accurately evaluate the deal that's on the table.
If the producer assists in writing or arranging the artist’s music, he or she will receive a mechanical royalty in addition to the record royalty. The mechanical royalty, is paid by the record company to songwriters for the right to record their songs. Some producers, namely “producers of tracks” who compose the music, are entitled to 50% ownership of the song, and thus, 50% of the mechanical royalties also referred to as the publishing rights to the song. The record company would pay the other 50% of the royalty to the other songwriter(s), usually the writer(s) of the lyrics. If the artist is the sole songwriter then normally the producer would not share in the mechanical royalties if the producer does not contribute to the songwriting. However, because some producer's assistance in crafting an arrangement of a song written by an artist into a hit song, a producer may still ask for a percentage of the publishing income, which is the money made by the song apart from the money made from the recording.
As you can imagine, this system can get complicated if a label or artist uses several producers for the recording. An entertainment attorney should probably be consulted to determine the best way to structure the contract when there are more than one producer. In all cases, it is important to have a written agreement to make it clear what rights the producer will have and what royalties the producer will get paid. When there is no written contract, this can cause arguments, which can lead to lawsuits. Therefore, the best time to complete a contract is before the producer ever begins any production services.
How Do Music Producers Get Paid?
Music producers' contract terms can vary considerably. Everything from the genre of the music to the bargaining power of the producer determines what kind of money they can demand. There are some generalities, however.
A producer who's new to the business might receive no advance at all and work solely for the purpose of building a portfolio. Other producers get a per-song fee, based on their experience and success, the artist’s level of success, and the number of songs to be recorded. The fee also can be influenced by whether the label is local or national, independent, or a major record company. Some producers forgo advances and charge an artist a flat fee. This is a good way for new producers and new artists to work together in a cost-efficient way that helps both their careers.
The advance might include the actual recording cost when producers work in their own studios. This is sometimes called a fund deal. It's up to the producer to make it clear in the contract what percentage of the funds go to the advance and how much is considered a recording fee. Recording fees aren't generally recoupable against producer royalties, but advances should be recoupable or subtracted from royalties ultimately paid to the producer, just as the name suggests. It's advance money that will technically be earned later.
Many producers receive a percentage of an artist's royalties earned on an album. These percentages are also called "points." One point equals 1%. Traditionally, the royalty is based on how the artist was paid, which is typically a percentage of the record’s sales price multiplied by the number of CDs or downloads sold. The record royalty to the artist is around 15% to 16% of the sales price of the audio product. The record royalty for a music producer is usually between 3% and 4% of the record’s sales price, or 20% to 25% of the artist's royalties.
Record One Royalties
Producers are typically paid "record one" royalties. They're paid for every album sold, unlike artists who only receive royalties after recording costs have been recouped.
Most producer contracts specify "retroactive to record one" clauses to make that clearer. The artist doesn't owe the producer any royalties until they or their label recoups their recording costs. The producer is owed royalties on everything sold going back to that first record, however, after the costs are recouped.