1.0 What is the Producer Worth?

1.1 Basic Concepts

The producer is generally entitled to a royalty so that his efforts will be rewarded according to the level of success achieved. The producer will rarely have any involvement in the promotion or marketing of the record so that the level of success is not within his control. The producer will invariably require a fee for his work which will usually be treated as an advance against his royalty entitlement. Producer royalties range usually from 2% of the dealer price to 5% of the dealer price with most producers being paid 3% or 4%. Most producers (like the rest of us) think they are underpaid. Some people think that producers are generally overpaid. It is certainly true that successful producers are very wealthy but few would begrudge them their rewards. Sometimes, a producer will be persuaded to work on the basis that no royalty will be payable. This is rare and is generally restricted to the production of superstar artists. Some superstars resent having to pay a substantial proportion of their royalty income to a producer in circumstances where the reputation of the artist is already established. The superstar may notice that his royalty earnings from his last album were, let us say, four million pounds but that one million pounds of this was paid to his producer. Having a superstar’s ego he or she will wonder whether the producer’s input on the last album justified so high a reward. The artist may not want to pay the producer another one million pounds for spending six weeks in the studio recording the next album. The superstar may remember that the producer was paid an advance of £50,000 for the last album and may decide that on this occasion he or she will generously offer £250,000 (not bad for six weeks work) but on the basis that this represents a buy out of all rights so that no further royalties will be payable. Given that the artist is a superstar no doubt the producer is also from the top drawer. He will be insulted by the suggestion that he should work on a record and have no royalty entitlement and he will reject the proposal out of hand. If the superstar persists and if the producer needs the £250,000 badly enough (perhaps he has not made a sufficient tax reserve in relation to earnings from the last album) the superstar may succeed.

1.2 Artist v Producer

On balance, producers are probably valued more highly by record companies than by artists. Too often, artists end up resenting the amount the producer earns. If for example the gross artist royalty is 16% and this is inclusive of a producer royalty of 4% (an example to which we will return later in this chapter) then in the case of a solo artist that artist will earn three times more than the producer (although the artist royalty will be available for recoupment of recording costs whereas the producer’s royalty probably will not). The solo artist may feel reasonably comfortable with this. However, if we look at a four member band the producer’s 4% will exceed the 3% available for each of the band members. Moreover, the band’s work does not end once the recordings are completed. This may be followed by perhaps two years of hard slog by the band in terms of promotional work and touring. Also, of course, the band may have time only to record one album every two or three years; a producer may have time to produce perhaps three or four albums each year. On the other hand, the producer might argue that his work helps establish the artist’s reputation and the artist is able to profit from this by the release of further material whereas the producer derives no benefit from the artist’s future activities (although producers have been known in extreme cases to ask for an override royalty on the artist’s next album).

1.3 Remember that the Artist Pays

The artist (or the artist’s manager) should be aware of these issues and should be diligent in negotiating the producer’s deal. Too often, in a wave of enthusiasm for a particular producer, percentages are agreed in haste and with little thought. Still more dangerous, is the tendency of record companies to secure the services of the producer and agree the terms of his deal with little involvement on the part of the artist. Ultimately (assuming recoupment is achieved), it is the artist’s money generously being handed out by the record company to the producer. If the record company is determined to use a particular producer and that producer insists upon a royalty of say 5% then on rare occasions the artist may be able to persuade the record company to make a contribution (so that perhaps of the 5% only 3% or 4% is deductible from the artist’s gross royalty).

1.4 European Approach

European record companies (outside the UK) usually adopt a different approach. Often, the producer’s deal is unrelated to the artist’s deal, i.e. the artist’s royalty payable under the recording contract tends not to be inclusive of the producer royalty and the royalty payable to the producer tends not to be subject to recoupment of recording costs (although it seems that increasingly Germany is adopting the UK model). Nevertheless, the rates of royalty payable to producers in Europe tend to be similar to the rates which apply in the UK. European record companies generally adopt a more flexible approach than their UK counterparts and may sometimes be persuaded, for example, to allow the producer’s lawyer to prepare the contract (a distinct advantage!) even (sometimes) contributing towards the legal fees.