Producer Points Explained in Plain English
By Written by Peter McVeigh
What a point is, what it's a percentage of, and why three points can mean very different money depending on the deal.
A "point" is one percent. When someone says a producer gets three points, they mean three percent of something. The tricky word is "something", because that's where most of the money is won or lost.
This guide explains what points are, how they differ between label and independent deals, and what to check before you agree to any.
Why producers get points
A fee pays for the work. Points give a producer a share of how the record does afterwards. That can suit both sides: the artist may be able to pay a smaller fee up front, and the producer has a reason to care about the record's long-term success.
Points of what?
This is the question to ask first. In a traditional label deal, points are often quoted out of the artist's royalty. In an independent deal, they're more often worked out on net income, meaning what the owner of the recording actually receives after distributor or label fees.
Deal: What points are a percentage of: Who bears the cost
Traditional label deal: Usually a royalty base set by the record contract: Often comes out of the artist's share
Independent release: Often net income received by the artist or their label: The artist, as owner of the recording
Here's a made-up label example. An artist's rate is 18%. If four of those points go to a producer, the artist is left with 14%. That's about 22% of what the artist would otherwise have earned on that recording.
What's a normal number?
There's no fixed figure. In label deals, 3 to 4 points inside the artist's rate is often talked about as a starting position, but it isn't a set market rate. Experience, the size of the fee, how many tracks are involved and the artist's budget can all change it. Some producers take a lower fee for more points. Others with few credits take fewer points and a bigger fee, as they need the money now.
Be careful with percentages copied from a different kind of deal. Three points of net income on an independent release isn't the same as three points of a label royalty.
A worked example
This example is made up. An independent artist pays a producer a fee of £2,000 and three points of net income.
Net income: Royalties earned at 3%: If the fee is earned back first: If the fee is separate
£10,000: £300: Nothing yet: £1,700 still to go: £300 paid
£66,667: £2,000: Nothing yet: fee now earned back: £2,000 paid
£100,000: £3,000: £1,000 paid: £3,000 paid
You can test your own numbers with our Points and Recoupment Calculator.
Questions to settle
What exactly are the points a percentage of?
Are they paid on every track, or only those this producer worked on?
Does the fee get earned back from them first?
What gets deducted before the figure is worked out?
Do they cover all income, including sync and licensing?
How often are statements sent, and can the numbers be checked?
How long do payments last?
If you're the artist
Remember that points continue after the excitement has passed. Someone has to work them out and pay them, possibly for many years. Set up a simple way to do this at the start, or ask your distributor if it can split income automatically. Also, don't give away points without knowing what's left for you once other people have been paid.
If you're the producer
Points on a small release may never amount to much, so don't treat them as a substitute for being paid for your time unless you're choosing to take that risk. Keep your contract and credits somewhere safe, and ask for statements when they're due.
What to do next
Open our practice Music Producer Contract and read the royalty, recoupment and statements clauses using the Help buttons. Then take your real deal to a lawyer before anyone signs.
Disclaimer
General information for independent musicians, not legal, tax or financial advice. Deals and rules vary, so check your own contract and take professional advice before relying on this.