An advance is defined as payments of royalties to an artist. The money given to an artist by a label is to be used for the recording, and production of the album. This might also be called an album fund advance.
At major labels a new artist might receive $50,000 to $100,000, A mid-level artist might receive $100,000 to $200,000, and a superstar artist might receive $300,000 to $1,000,000 for an album advance. Indpendent labels however might only give out $2,500 to $25,000 and this depends on the genre.
When an artist receives an album fund advance it is to be used for:
- Recording Costs
- Personal expenses
An example of a recording album fund might look like this. Total advance given to artist = $100,000 and $80,000 is for the album and $20,000 is for personal expenses.
Typically any money left over from the album is given to the artist as personal expenses. If however, a project goes over budget the expenses will be paid by the artist or the label will terminate the contract.
Because all advances are recouped by the labels from artist royalties it becomes important to that artist always work to get as much of an advance as they can up front. Video and independent promotion costs are also expenses that labels will want to recoupe money on but are not always included as part of the album fund.
Typically a major label will want to make back 50% of the cost associated with the advance before they share profits from royalties with artists. Independent labels typically want to recoupe 100% of the advance before they share profits from royalties with artists.