What does recoupment mean in the music business? The first thing to realize is that, if you are signed to a record label, you are there to make money. No business can survive without sales and the recording industry is no different – regardless of which label you are looking at. If a label didn’t want to make money and was just creating music for the art they wouldn’t need marketing or budgets for a publicist. They could simply record the music and leave it locked away in a vault – or give it out for free.

So the label has to make a return on its investment – namely you and your music.  So recoupment is the process of the label getting back the money that they gave to you for recording, marketing, publicity, pressing, distribution, videos, etc. Basically, anything that they paid out for in putting you out to the public. All that money they gave you to make your album? That was unlikely to have been a gift – it was a loan. To be repaid before you make a dollar.

Usually when a record contract is signed, the artist walks away with money to support them, do the album and buy things that are needed in order to make the album a success.  It is, in a nutshell, a loan to the artist that must be recouped, and is not free money. The reality is that if the album does poorly, and the money is not collected, then the artist usually can prepare to be dropped from the label, unless it is an artist that has stellar sales in the past and can prove that this was just something that will not likely take place again. It was, in these cases, just a ‘blip.’

According to statistics, fewer than 10% of signed artists mange to recoup. So how can you get around this? Check the small print on the contracts you sign – it is best to employ the services of a music industry lawyer. See what you can do for yourself – do you need the label to get you new instruments? Can you work your own promotion with an online press kit? Do you need to be holed up in the most expensive studio you can find to write your songs – use your studio time wisely – and get out asap. The less you spend the less recouping the label will want to do and the sooner you will see your own profits.