When it comes to being apart of a record label, royalties are simpler than you might think. Depending on where you stand the split of royalties may see a bit confusion to you. We break down the industry standard royalty rates that record labels pay out to their individual artists. This information depends on you as an artist and the interest of the record label. We have divided different record label interest degrees into four main categories being minor heat, moderate, heavy heat, and superstar.
The Only Guide You'll Ever Need On Royalties & Record Labels
How it Works
In its simplest form you as an artist create music. You give the music to the record label and they then distribute it and publish it under its companies to all of the major streaming platforms. The streaming platforms come back and give your record label the amount of royalties your music has earned on its site and the record label cuts you off a percentage of that. The label keeps the rest for its services, staff, and profit.
Record labels and royalties work as a middle man in this case. Your percentage as an artist depends on your agreement and how much leverage you have (which we will get into below). This can be a good scenario if you are someone who is willing to delegate the majority of the responsibility for a good portion of your revenue.
Numbers & Rates
The type of rate you are entitled to has to deal with what type of value you are bringing to the table. When it comes to making deals on rates there are four primary categories artists fall into.
The types of artist and royalty rates are listed below:
Minor Heat: 15%-17%
This is the degree to how badly a record label is pursuing you and how much negotiating power you have. Minor heat means that you are a new artist, not in the hip-hop space, some social media activity, and maybe 1 or 2 labels interested.
Moderate Heat: 17%-18%
You have good social media numbers, strong streaming numbers, and two or more labels chasing you.
Heavy Heat: 17%-20%
You are either a hip-hop or pop artist, almost every label is looking to sign you, you have great numbers, your current project is doing fantastic, and labels want to distribute your songs and future projects.
Your streams and social media are in the stratosphere (millions). Your performances and tours are consistently growing. At this time you will be able to negotiate a profit share of royalties with your label, a distribution deal, or even a joint venture with them. You have tremendous leverage when you are at this level as you can see.
In most cases these are the standard when it comes to royalty rates with labels. The more successful you become the more leverage and negotiating power you have. It is more than okay to take a less than ideal agreement at first, just as long as you have an agreement to not give away too much of your future earnings.