Understand How You’re Getting Paid – ROYALTIES on GROSS vs NET REVENUE and an ADVANCE 1

Publishing contracts include terms for how musicians and writers get paid for their work and understanding these terms helps you figure out how much you are getting paid and when you will see the money.  Most publishing contracts include an ADVANCE and ROYALTIES that are based on either NET or GROSS revenue.  These three little words ADVANCE, NET and GROSS mean very different things.  Let’s break it down:

ADVANCE:  An advance is a set amount of money that is paid upfront when the contract is signed.  The advance can be paid in one lump sum or may be divided in to multiple payments.  Generally royalty payments will not start being paid until the publisher recovers the cost of the ADVANCE.

ROYALTIES based on NET vs GROSS revenue:  Publishing contracts generally grant a percentage of the royalties to the writer or musician and this % will be based on GROSS or NET sales revenue.   A royalty % that is based on the GROSS revenue means that the writer or musician’s cut is calculated from the money made from the sale of the work BEFORE any deductions are made for the publisher’s business overhead costs.  On the other hand, a royalty % based on NET revenue means that the publisher makes deductions for its business overhead costs before calculating the royalties owed the writer or musician.  The writer or musician makes more money if a publishing contract is based on GROSS revenue; however, basing royalties on NET revenue is more common.

BY: Vanessa Kaster, Esq., LL.M.

For personalized legal services you are welcome to contact me at vk@kasterlegal.com

LEARN MORE: Another important and common contract term to be aware of  is ‘All Media’ –> https://iplegalfreebies.wordpress.com/category/all-media-contracts/

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