What is Recoupment?

Recoupment is the process by which a record label, publisher, or investor recovers the money they have spent on an artist or project before the artist begins receiving royalty payments. These upfront costs may include advances, recording expenses, marketing, promotion, or other production costs.

When a contract includes recoupment terms, the company first collects revenue generated by the music until the total amount of the initial investment has been repaid. For example, if a label provides an artist with a $50,000 advance and covers recording costs, the label will recover that amount from the artist’s royalties before paying additional earnings to the artist.

Recoupment is a common feature of music industry contracts because it allows companies to invest in artists while reducing financial risk. Once the expenses have been fully recouped, the remaining royalties are typically shared according to the percentages defined in the agreement.