Royalty Statements Cost Deductions

Our Senior Label Manager Alex Flitsch tells us all there is to know about the cost deductions in royalty statements! Alex has more than 15 years of experience in preparing artists statements, for his own label Connaisseur Recordings. Read below. 

It’s that time of the year again. As always in March and September, when the latest distribution statement is ready for the recent accounting period, the majority of labels prepare the bi-annual royalty overview for their licensors. This means, right now those labels are working on the statements for the 2nd half of 2021.

Other than the revenue, labels need to add all costs into their accounting calculations and we have realised that many labels still aren’t sure how and what they are allowed to deduct. Because of this, we have decided to prepare a little list for you.

First of all, check what you have agreed on in the deal you made with your licensor. We recommend being transparent, but not too detailed otherwise unexpected and unusual costs can not be considered. Even if the statement shows a negative amount, licensors love transparency. It reduces discussions and builds trust.

A standard list of costs can be 

  • Production Costs
  • Legal Costs
  • Remix
  • Video Costs
  • Mechanicals
  • Promotion
  • Marketing
  • Shipping
  • KSK (Künstlersozialkasse)
  • Tech fee*
  • Media fee*

A more detailed explanation can be made for remix and video costs, as often the artist also invests in that part of the release.

*Tech fee / Media fee 

Something labels often miss to consider in their accounting calculation is small amounts, which can often work out to unexpectedly high amount. Labels nowadays have plenty of subscriptions, which are definitely needed for releasing music and helping the artist, as well as the release. For example, for services such as Soundcloud, Bandcamp, smart-links providers, analytics and monitoring tools, to name a few. Have you ever checked how many of those services you use? Displaying all those services individually in your statements is one way, but we think creating cost blocks makes more sense in this case. Depending on how many services you use and of course how big your catalogue is, a deduction of 5 to 10% of the revenue amount of each artist statement is realistic. This is just a recommendation but many of our small and mid-sized labels have to watch their expenses and this is one small hint to get your label’s costs under control. 

Creating artist statements is an essential part of running a label, which is why we have developed an easy-to-use tool called “Royalty Hub”, ideal for small and mid-sized labels. “Royalty Hub” is connected with our Direct PRO, so metadata will be imported into the Royalty Hub system and the releases and artist accounts will be set up automatically. The same goes for the monthly Paradise-distribution statements. There is no manual import required. “Royalty Hub” is available as a stand-alone service or as part of PRO+.

For further details, please reach out to your label manager.