Let me tell you how artists get rich on paper and broke in real life.
You sign a deal. The label gives you $100,000.
You think that’s your money.
It’s not.
That’s a loan. And you’re paying it back with your own royalties.
That’s recoupment. And it’s the reason most signed artists never see a royalty check.
What Recoupment Actually Means
When a label gives you an advance — that money isn’t a gift.
It’s charged against your future earnings. Every dollar they spend on you gets added to a debt you owe them back. Not in cash. In royalties.
Until that debt hits zero, you don’t see a single royalty payment.
The label calls it “recouping the advance.” What it really means is — they get paid first. Every time. Until they decide the debt is cleared.
And here’s the part nobody tells you.
The royalty rate they pay you to recoup is a fraction of what the music actually earns.
The Math They Don’t Want You To Do
Say your deal looks like this:
- $100,000 advance
- 15% royalty rate on net sales
- Album sells 50,000 copies at $10 each = $500,000 in revenue
You’d think 15% of $500,000 = $75,000 toward your recoupment. Right?
Wrong.
The label deducts packaging costs, breakage fees, free goods allocations, distribution fees, and a dozen other line items before they calculate your 15%.
By the time they’re done with deductions, your effective rate might be 10%. Or 8%. Or less.
So your $500,000 album might only generate $40,000 toward your $100,000 debt.
You just sold 50,000 records and you still owe the label money.
That’s not a mistake. That’s the contract working exactly as designed.
What Gets Charged to Your Recoupment Account
This is where artists get buried.
Most artists think only the advance counts against them. That’s the first lie.
Here’s what labels charge to your recoupment balance:
Recording costs. Every studio session, engineer, producer fee, and mixing cost gets charged to you — even if they chose the studio and approved every session.
Music video budgets. They greenlight a $200,000 video. You pay for it. Out of your royalties.
Independent promotion. They hire an indie promoter to work your single at radio. That bill comes back to you.
Tour support. They “help” fund your tour. That’s a loan. It recoupes.
Advances to producers. If they paid your producer an advance, that often gets charged to your account too.
You didn’t spend that money. You didn’t approve every line item. But your royalties are paying for all of it.
Cross-Collateralization — It Gets Worse
Some deals have a clause called cross-collateralization.
What that means is — if you have multiple albums under the same deal, the label can pool all the debts together.
Album 1 didn’t recoup. Album 2 made money. Instead of paying you on Album 2, they apply those earnings to the Album 1 debt first.
You could have a platinum album and still be considered “unrecouped.”
Artists have gone gold, released three projects, and never received a royalty check because of this clause.
Read every contract for this language. If it’s in there, it needs to come out or the deal needs to die.
Why The Label Doesn’t Care If You Recoup
Here’s the part that will change how you see the entire industry.
The label gets paid whether you recoup or not.
They collect the full revenue from your music. They deduct what they owe you as royalties. They keep the rest — which is the majority.
Your royalty share is a small piece of a big pie. Their share is the pie.
So when you’re unrecouped, they’re not losing money. They’re still collecting their share of every stream, every sale, every sync license.
They just don’t have to pay you yours until the debt is cleared.
They can have an “unrecouped” artist who generates millions of dollars for the label. The label profits. The artist gets zero royalties.
That’s not a bug. That’s the business model.
What You Should Do Before You Sign Anything
Get the royalty rate in writing and understand the base it’s calculated on. Net receipts versus gross receipts is a massive difference. Push for gross.
Cap what can be charged to your account. Negotiate a limit on recording costs and video budgets that get recouped. If they won’t cap it, walk.
Kill cross-collateralization clauses. Each project should stand on its own. Non-negotiable.
Audit rights. You need the contractual right to audit the label’s books. Labels make mistakes — sometimes in their favor. You need the ability to verify what they’re reporting.
Hire an entertainment attorney before you sign. Not after. An attorney who negotiates these deals every day will spot every trap before you walk into it.
The Independent Artist Advantage
When you own your masters and release independently — there is no recoupment.
Every dollar your music earns flows directly to you through your distributor.
No debt. No deductions for videos you didn’t approve. No producer advance being charged to your account.
Streaming pays you. Publishing pays you. Sync pays you.
You keep your royalties from the first stream.
That’s not a small thing. That’s the entire game.
The Bottom Line
Recoupment is how labels legally pay artists nothing while profiting off their work.
It’s not illegal. It’s in the contract.
That’s why the contract is the most important document in your career. Not the music. Not the deal announcement. Not the advance check.
The contract.
Read it. Understand it. Negotiate it. Or walk away from it.
Because the label isn’t gambling on you. They’re investing in an asset that pays them first — and you only if there’s something left.
Action Steps — Before You Sign Anything
- Ask for a full breakdown of what will be charged to your recoupment account
- Negotiate the royalty base — push for gross receipts not net
- Put a hard cap on recording and video costs that recoup
- Strike any cross-collateralization language
- Secure audit rights in writing
- Hire an entertainment attorney — not a general practice lawyer, an entertainment specialist
If they won’t negotiate any of these points — that deal isn’t a deal. It’s a trap with a check attached.
KingPaySos | Blacc Market Enterprises
#StaccOrStarve — Own the music. Own the money.
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