Music Business Guide: Tread Lightly, Advances Are Loans

Vol 2 - Tread Lightly, Advances are Loans

We’ve all heard stories about start-up artists having independent hits, signing big deals and presumably living on easy street, right? Wrong. From time to time there will be an artist who signs a multi-million dollar deal,  however, to be clear, that money is what is called an advance and advances have to be paid back, just like loans.  Though these advances are not usually paid back in cash from the artist’s pocket, they are paid back from the royalties the artist’s music will continue to earn (hopefully) overtime.

But wait – you’re probably thinking that if a record company is willing to dish out a couple mil in advances for your band that the label will fight harder for your band to breakthrough.  This isn’t necessarily true.  If a label has put up some big money, I’m thinking they see  an easy opportunity to sell to a large, possibly national,  fan base that your band has already grown.  If the easy sell isn’t there  for your record, the advance is written off as a bad debt and the label moves on.  Ouch.

So, what are the advantages of the advance? Simply, its cash…now. With that you can continue to eat, pay rent, work on your music and engage with fans.  Without advances artists wouldn’t be able to continue working and, in turn, the labels would suffer, which, obviously, labels don’t want.

The heart of the matter here is that artists and labels depend on each other – artists make great music and labels are the marketing machine behind it – one can’t survive without the other.  I don’t ever really see the advance going away but, as artists continue to develop independently, it will be interesting to see how labels position their advances in different ways.

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