This has to be one of the greatest mysteries for hopeful music producers. How do they actually make money in the industry? Do they rely solely on their performance fees and royalties, do they get 50% of a song's profit, or is it all through "producer points"?
4 Different Ways Producers Get Paid for Their Work
There are typically four different ways that a music producer gets paid.
• Producer points: A producer point is a percentage of the net profits made by an album or single, with the amount negotiated before production begins.
• Royalties: Producers also receive royalties from any songs they co-wrote and/or helped record, which can be a significant source of income for successful producers.
• Flat fee: Producers may also be paid a flat fee for their work on a project, which can vary depending on the budget and success of the artist or album.
• Hourly rate: Some producers may also charge an hourly rate for their work in the recording studio.
It is important to note that producer points and royalties are often only given to credited producers, and may not be given to those who worked on a project in an uncredited or assistant role.
Overall, the producer's payment will depend on the specifics of their contract and negotiations with the artist or label. It is important for producers to protect their rights and ensure they are fairly compensated for their work.
But let's explain each of those four ways in a little more detail.
Producer Points: How Do They Work?
In the music business, a "point" is another word for percentage or percentage point. So, when someone asks you how many points they're going to get on a song, they're really asking what percentage of royalties they will receive.
The industry standard in the US is that producer points are typically taken out of the artist's reserve of royalties. This means that an artist signed to a label probably won't be able to afford to give away more than 2-5 points because they've already signed away most of their royalties to the label.
Independent artists usually have more flexibility when it comes to giving producer points because they own 100% of their recording royalties.
The value of producer points varies widely among artists and producers depending on three factors: passion for the project, whether the artist is signed to a label, and the artist's overall success level. In general, though, producer points are a way for artists to show their appreciation for all the hard work that goes into making a great song.
- Producers are key creative contributors to a recording and deserve backend royalties based on the success of the recordings they produce.
- These backend royalties, called points, are based on a percentage of the back-end royalties and usually refer to them in the context of a major label deal.
- For independent artist deals, a producer might typically get between 15 - 25% of net royalties on the sound recording (from the artist's cut); they will also frequently get paid some flat fee upfront for their recording work in addition to the backend royalties that they might get.
- Major label deals give producers points that can range anywhere from 3 to 7 points; 3 points are more typical for newer, upcoming producers, while recognizable names might get 4 to 5 points.
- Points are simply defined as a percentage point of the total royalty for major label deals, and they get subtracted from the artist's royalty share.
Royalties: How Do They Work?
Are royalties and points the same thing?
No, royalties refer to the payment made to a songwriter or artist for the use of their music. This can include plays on streaming platforms and radio, sales of physical copies, and performances in live shows.
Producer points refer specifically to the percentage of profits a producer earns from an album or single they helped produce.
A producer may also earn royalties from their own songwriting contributions to a track, but this is separate from their producer points.
How do producers earn royalties?
Producers can earn royalties from the success of an album or single they produced, as well as from their own songwriting contributions. These royalties are typically earned through partnerships with performance rights organizations and music publishing companies.
It is important for producers to register their work with these organizations in order to ensure they receive proper payment for their contributions.
Producers may also earn royalties from synchronization, or the use of a song in television shows, movies, and advertisements. These deals are often negotiated separately from album and single royalties.
Flat Fees: How Do They Work?
Producers may also be paid a flat fee for their work on a project, which can vary depending on the budget and success of the artist or album. This upfront payment is separate from any royalties they may earn.
Flat fees can be negotiated based on the producer's experience and contributions to the project, as well as the success of similar projects they have worked on.
In some cases, a producer may work on a project for a flat fee with the potential to earn additional royalties if the project is successful.
How Does a Producer's Up-Front Fee Vary Based on Their Experience and Success?
If a producer has had successful projects and a strong track record, they may be able to negotiate a higher up-front fee for their work.
This can also depend on the level of success and fame of the artist they are working with, as well as how many songs need to be produced for the project.
An experienced producer may also have an easier time negotiating better terms in their contract, such as a higher percentage of producer points.
Hourly Rates: How Does This Work?
Similar to a flat fee, a producer may also be paid an hourly rate for their work in the studio. This can vary depending on their experience and success, as well as the budget of the project they are working on.
Hourly rates may also depend on how long it takes to complete a track, with additional fees added for any extra time needed to finish the project.
The hourly rate is separate and has nothing to do with royalties and producer points, which are only earned from the success of the finished project.
‼️ This is why it is SOOOO important for producers to negotiate their hourly rate, as well as any additional fees, before starting work on a project in order to ensure fair compensation for their time and contributions. ‼️
Outlining Payment Terms With A Contract
Music producers and artists should always have a contract in place before releasing a song. It's important to have an agreement that outlines each person's role and what they will be paid.
Without a contract, there can be misunderstanding and conflict about who did what and who deserves credit and money. A contract can also help prevent one person from taking advantage of the other.
Music is a collaborative effort, and both parties should feel like they are being treated fairly. Having a contract ensures that everyone is on the same page from the start and can help avoid problems down the road.
Check out our 6 Free Music Producer Contract Templates so you can protect yourself and your collaborations.
Should You Accept Producer Points And No Upfront Fees?
A lot of producers have a short-term mindset and would rather receive a higher up-front fee rather than producer points. Of course, it is natural to have doubts about where a song may go, and you have likely worked with a number of artists who didn't go on to become successful.
However, in some cases, producer points can lead to long-term success and income far beyond any up-front fee. These points can continue to generate income for years after a project's release, as opposed to a one-time up-front fee.
In 50 "Curtis Jackson" Cent's book, Hustle Harder, Hustle Smarter, he talks about a guy named Sha Money XL - this is the perfect story to input here and display how important points are and why smart music producers are vying for them.
The Story of Sha Money and the Lost Point
Sha Money XL was an associate of 50 Cent, who he met when he first got into music.
Sha ran a music studio from his basement and provided a space to record for 50 when other, bigger studios didn't want to work with him.
When 50 Cent signed a deal with Interscope, his next major label deal, Sha submitted a $50,000 invoice for the recording sessions they did at his house - even though they never discussed any payment prior to this. He wanted to be reimbursed for the recording sessions.
Because they had never discussed it, 50 was surprised and felt that the price was over-inflated. Despite feeling disrespected, 50 Cent offered Sha $30,000 and 1 percent of the royalties (a "point"), but Sha dismissed it. Even Sha's lawyer tried to talk some sense into him, but again, Sha dismissed it.
Of course, that album went on to sell 12 million copies worldwide...
If Sha had handled the situation differently, he could have potentially gotten more money out of the deal by negotiating the point.
Something 50 said he would have done on top of an already generous deal. And, Sha would have walked away with close to $2 Million dollars from that deal alone.
In the music industry, it is important to always have things in writing and discuss terms before starting work on a project. Otherwise, you may miss out on future potential earnings as Sha did.
“If an album really takes off, there’s no limit to the amount you might make.”Hustle Harder, Hustle Smarter, Curtis "50 Cent" Jackson
With that said, it is wise to negotiate multiple forms of payment, including both up-front fees and producer points. It is also recommended to have an entertainment attorney assist with this process as they are well-versed in the industry and can ensure fair terms for all parties involved.