Open a royalty statement and you’ll often find a line that quietly shrinks your check: the reserve. Labels and publishers hold back 20 to 30 percent of your earned royalties as a ‘reserve against returns’ — money they keep in case physical product gets returned or digital earnings get adjusted. It’s standard practice. It’s also a pile of your money sitting in their account, sometimes for years, and most artists never question it.
Reserves are supposed to liquidate — released back to you over subsequent statement periods as the risk passes. In practice, companies are slow to release them and quick to take new ones, so there’s always a rolling chunk of your income held back. On streaming-heavy statements, where returns barely exist, a 25 percent reserve is hard to justify — yet it appears anyway, because the contract allows it and nobody negotiates it.
This is negotiable, and you should negotiate it. Push for a lower reserve percentage (10 to 15 percent), a cap on how long reserves can be held (liquidate fully within two to four periods), and a floor — no reserves once an album is past its initial sales window. For digital-only releases, argue reserves down to near zero: there are no physical returns on a stream. Get the liquidation schedule in writing, not as a verbal promise.
Audit your statements for reserve abuse: reserves taken but never liquidated, new reserves on catalog that’s years old, reserve percentages higher than your contract allows. These are among the most common findings in royalty audits — free money recovered by reading carefully. The reserve line isn’t fraud, it’s leverage the company holds by default. Take some of it back in negotiation, and police the rest every statement. It’s your money. Act like it.
About the Author – Ruben Burgos: Ruben Burgos brings over 25 years of music expertise and more than 15 years of model guidance to the table. He is the indie major pinnacle to retaining credits for musicians and helping them navigate this wicked industry without the fuckery.