Producer Points – What are They? and How are They Calculated? (Producers & Points Pt. 2 of 3) - YouTube

Hi, my name is Tony van Veen, CEO of Disc Makers.

In my last video, I talked about the difference between a producer and a recording engineer.

Today, I'm going to be discussing what producer points are.

As in the saying that you've probably heard,

"The producer's going to get 3 points on your recording."

Now, why should the producer get these 'points'? And what do they even mean?

Well, here's the deal.

A long time ago, the producer would step into the game

after the songs were all written and ready to go and

he or she would guide the process and work with the engineers who set up the mics

and turn the knobs and basically got the recording done.

Today, it's a different game.

Producers tend to do much more.

Particularly in pop and hip-hop, the producers may create the beat.

They may sometimes create the whole backing track.

They will coach artists on how to play their instrument on a particular song,

how to sing a song, they may even rearrange entire songs.

So,

many producers nowadays are, in fact, in the room from the get go

working with the song,

as the artist is creating them from the ground up.

In short, the producer's a key creative contributor to the recording and for that,

they deserve some backend royalties based on the success of the recordings that they produced.

These backend royalties are called points

because they're based on a percentage, aka points, of the back end royalties.

People referring to points, however, usually refer to them in the context of a major label deal,

even though producers can certainly also get backend royalties on indie productions.

To understand points, you really need to understand the basics of music copyrights.

Now, I did a whole series on this. You can find it on the Disc Maker YouTube channel.

But, quick refresher. Every song, every recording,

has two copyrights.

There's the sound recording a.k.a. the master or master recording, which is usually owned by the artist and the label.

And then there's the copyright on the composition a.k.a. the song itself,

which is owned typically by the songwriter or by the publisher.

Points, for a producer, refer to any royalties on the backend that they share on the sound recording.

Now for independent artist deals either self-released or small label deals, a producer might typically get between 15 - 25% of net royalties on the sound recording.

And net is usually defined as some form of royalties after the recording costs, after the producer's fee, and other third party production costs

like distribution and manufacturing. The producer will also frequently get paid some flat fee upfront

for their recording work in addition to the backend royalties that they might get.

So a typical indie deal might be say, $1500 to record the songs up front plus 20% on the net royalties.

Now, for major label deals, producers get these points that can range anywhere from 3 to 7 points.

3 points are more typical for newer, upcoming producers.

Recognizable names might get 4 to 5 points. And anything over 5 points is typically reserved for superstar producers.

Points are simply defined as a percentage point of the total royalty for major label deals.

And they get taken out of the artist's royalty. So if an artist has a deal with a label for 18 points,

the producer gets 4 points in this example, and those 4 points that the producer might get would get subtracted from the artist's

18 points. So the artist ends up with 14 points.

If you do the math,

to compare major label points versus the indie percentage,

that 4 points that the producer might get in our example, as a part of the 18 points, or divided by the 18 points that the artist would get,

4 divided by 18 is about 22% of the artist's share of the royalties.

And by the way, a side note to you indie artists. In this example, all the producer points are coming out of the artist's share and the major label is still keeping the same 82% of the royalty.

Now if you're wondering what you should pay on your next album project, you can usually negotiate the backend percentage based on the upfront fee.

More money up front, less percentage on the backend and vice versa.

So maybe a producer wants $3,000 upfront for a buyout, meaning no backend percentage.

But maybe you have only $1500 upfront to pay and so you'll negotiate a 15% backend cut.

Or if you only have $500 upfront, maybe it's a 25% cut of the backend.

If you have no money to pay upfront whatsoever to a producer, then you might have to give up a 50/50 split of royalties and sometimes ownership.

So if you want more detail on this, our friend Ari Herstand has a great article on his blog Ari's Take.

You can get it at aristake.com/producer-splits.

I hope you found this helpful. Next time, I'll be talking about whether and when your producer might also be deserving of a cut of your publishing.

I hope to see you then.