Packaging deductions were designed for physical albums: the label deducted twenty to twenty-five percent of your royalty for the cost of the CD case and artwork. Your music streams with no packaging at all, yet many contracts still apply the full packaging deduction to digital income. You are paying for boxes that were never manufactured.
The math is brutal once you see it. On a ten dollar album royalty base, a twenty-five percent packaging deduction drops you to seven fifty before any other deductions touch it. Applied to streaming income where packaging costs are literally zero, the deduction is pure profit for the label taken directly from your pocket.
Labels defend it as standard language, and it is standard in the same way that paying for a horse’s feed is standard on a car lease. The world changed and the clause did not. Some modern deals have eliminated it for digital, which proves it was never essential. It survived this long because artists did not know to fight it.
Demand zero packaging deduction on all digital and streaming income, in writing, with no exceptions. For physical product, negotiate the deduction down to actual costs or a capped ten percent. This is one of the easiest wins in any contract negotiation because the label has no honest argument left. Do not pay for packaging that does not exist.
The streaming era was supposed to make royalties fairer, but legacy deductions followed the money into the digital world. Your job is to make sure your contract lives in the present, not the past. Audit your deal for every physical-era holdover, eliminate what you can, and never pay for costs that do not exist.
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.