In the music business, the term “recoup” is usually used to say a record label needs to “recover” the costs of production and promotion of an album or song before making any future payments to the artist or the band.

For example, every record label (or record company) will have a financial plan (i.e a financial budget) for each artist on it’s roster. And a record label will in most cases fund an artist’s project (or a single) based on what they think is sufficient during the status quo.

If a record label thinks the artist has great potential to capture the market they are more likely to increase the budget for that particular artist only. However, to be profitable a record label has to meet it’s financial obligations and increase it’s revenue in the same process.

NOTE: The financial obligation is to provide monetary support to the artist. From there the revenue stream comes from all the sources of income after the same project has been launched. And these include digital downloads, music streaming services, videos and so forth.

For instance, if a record label spends $100 000 on a project. Chances are they will not pay the artist any royalties until the same project has grossed not less than $100 000. If the project meets that threshold then the artist will start to receive royalty payments.

And that whole process of waiting for a project (or a single) to be successful is what people refer to by saying the record label has to recoup or recover all it’s costs in the business of music.

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