Are Music Recording Contracts Equitable? An Economic Analysis of the Practice of Recoupment

Abstract

This paper investigates the economic principles that underpin the contractual and financial relationship established in a recording contract, and in particular, the risk and return that each party to the investment is exposed. This analysis provides a pictorial view of sales volumes at which a record company achieves breakeven point and artists become recouped. This exploration of the underlying economic relationships facilitates a more informed assessment of the equity of the practice of recoupment. A range of recoupment structures are investigated and income shares are compared beyond the breakeven and recoupment sales volumes for the record company and artist respectively. A consequential benefit is the insight provided into the cost structure and pricing strategies of record companies.