The difference between gross and net in your contract is the difference between getting paid and getting played. Gross means before costs are deducted. Net means after. When a label offers you a percentage of net profits, every dollar of their spending comes out before your share is calculated. A fifty percent net deal can easily pay less than a twenty percent gross deal.
Labels love net deals because they control the costs that get deducted. Recording budgets, marketing spends, video costs, and a dozen creative accounting categories all shrink the net before you see a dime. Without caps and clear definitions, the net can be engineered down to nearly nothing while the label insists the project simply did not profit.
Your defense is specificity. Demand an itemized list of deductible costs with hard caps on each category. Exclude the label’s general overhead entirely. Require that costs be actual, documented third-party expenses, not internal allocations the label invents. And get the right to audit the profit calculations, because net deals without audit rights are just promises.
Whenever possible, negotiate on gross or on revenue with minimal deductions instead of net profits. A smaller percentage of a bigger, cleaner number beats a bigger percentage of a number someone else controls. Read every royalty term by asking one question: who controls the math. Then negotiate until the answer is not just them.
Royalty literacy is career armor. The artists who understand their statements catch the errors, win the negotiations, and keep the money they earned. Spend the time learning how your money flows, because nobody will ever care about your royalties as much as you do. Knowledge is the highest royalty rate of all.
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.