Music Label Advances Are Not Loans, Lawyer Akinyemi Onyoluwa Says

A record-label advance paid to an artiste is not the same as a conventional loan, Nigerian music lawyer Akinyemi Onyoluwa has explained.

Akinyemi said an advance is an early payment against an artiste’s expected future earnings under a record agreement.

He was speaking on the Big Convo segment of the Culture Daily morning show.

His explanation comes amid confusion among some artistes about why money received as an advance can later be recovered from their earnings.

According to Akinyemi, an advance is normally connected to the financial arrangement between an artiste and a record company.

He said a record company may provide money at the beginning of a relationship instead of waiting for the artiste to generate the earnings that would eventually be due to them.

“So I do not think an advance is a loan because you’re not paying with interest,” he said.

Akinyemi explained that a record deal can involve significant costs, including music production, music videos, marketing, promotion and touring.

The company may therefore recover eligible expenses from revenue generated by the project before the artiste begins receiving their share of profits under the agreed terms.

He compared the arrangement to constructing a building together.

Using his example, he said an artiste could receive money representing earnings expected over a future period, while the company also incurs expenses to build and promote the artiste’s career.

Those expenses must then be accounted for before profits are divided according to the agreed formula.

The distinction between the advance and the expenses, he said, is important for artistes negotiating record agreements.

An artiste receiving a large upfront payment should therefore not necessarily interpret it as free money.

Akinyemi urged emerging artistes to understand how advances, royalties, expenses and recoupment are treated in their contracts before signing.

He said artistes should not make decisions simply because a record company offers them a large sum of money.

He also warned against contracts in which companies seek a share of an artiste’s royalties without making clear commitments to invest in their careers.

He said some companies could seek to benefit from an artiste’s existing momentum without promising sufficient investment in music releases or promotion.

The lawyer advised artistes to seek professional legal advice before signing agreements, particularly when they do not understand the implications of the clauses.

He said every contract should be considered in relation to the artiste’s individual circumstances.

Akinyemi rejected the idea that there is a single formula for determining whether a record contract is good or bad.

He said an agreement that may be reasonable for an established artiste could be unsuitable for a newcomer.

“The case is case by case,” he said.

He explained that an artiste with significant financial backing could have the option of developing independently, while someone without that support might need an investor or record company to provide the resources required to launch their career.

The key, he said, was for artistes to understand what they were giving up in exchange for the investment.

He also encouraged young artistes to build some independent leverage where possible by developing their audiences, catalogues and businesses before entering major agreements.