In Music, PPD is the abbreviation for Publisher Price To Dealer which is the wholesale price that distributors charge their dealers for recorded works like Music albums, LPs, EPs etc. The PPD is what used as a benchmark for calculating royalty shares.
The PPD is very important in determining the sales price that can then be used to calculate royalties. Another form of determining royalties other than the PPD is what is called the SRLP.
The SRLP is the abbreviation for Suggested Retail List Price and is based more on what the record store or website charges to the consumer for recorded works.
Now that we’ve briefly discussed PPD and SRLP. It is important that to note that the PPD will not be the final figure that royalties will be based on because of certain deductions that will come into play so let’s discuss these…
While you may think calculating royalties would simply be subtracting the tax rate from the Whole price or PPD, there exist more deductions to be taken into account before the actual royalty rate can even be applied.
One of the deductions that was common in the old days was the delivery charge, even though it’s not as common now….
you’re more likely to run into the packaging charge.
The logic behind the packaging charge is that; the artist is only meant to get royalties on the actual music itself and not the artwork which constitutes the packaging.
Depending on the deal in place and the product being actually sold, the packaging charges may greatly differ.
With these deductions in mind the royalties would be calculated as:
Royalty = Royalty percentage × (Wholesale Price-Deductions-Tax)
For example if the wholesale price is $10 with total deductions of $2 and a tax rate of $1 …. with a 20% royalty percentage, the actual royalty would be:
Royalty = 20% × ($10-$2-$1) = $1.4
This calculation is to give you an idea of how we would come up with a royalty in a situation where we don’t have a label deducting their expenses.
In a 50/50 record label deal we would have to use a different formula which could look this:
Income from sales – Expenses = Profit
Profit × 50% share on royalty = Your royalty.
In this situation the income from sales would be the figure that you would have after deductions (including tax) have been applied to the total sales.
The deductions would be applied per unit of your product… which means each single unit would be paying for the deduction it attracts.
Expenses constitute all record label expenses that have to be recouped by the record label for their role in offering support services to you as the artist.
The profit would be the final figure you arrive at after all expenses have been subtracted. As the artist, this is the revenue would have a percentage in.
Record label expenses
Record label expenses can be overwhelming especially major labels that basically operate as companies with staff and the like.
Some of these expenses would be production costs, legal costs, shipping costs, packaging costs, travel costs, accounting costs, staff costs, marketing costs etc.
Therefore having an understanding of the record deal you’re in would give you an idea of what to really expect.
Do producers get 50% of the record?
Producers that can negotiate a good deal for themselves and can get a good percentage of the record especially if they have some sort of bargaining power or leverage, which could be how well established or notable the producer is.
Another factor to also consider is the amount of work that the producer does on a record.
Depending on how much work they do on the record and the negotiations in place, it is possible that they may keep 50% of the record.
This is possible with unsigned artists that are basically operating by themselves.
When a record label is involved it’s almost always difficult to get 50% of the master rights as the producer.
Beat maker royalty rates
Beat makers being the people that compose the record from scratch own 100% of master rights of the composition.
When an artists records lyrics to their beat, the artist owns the copyright to the lyrics. In this case it becomes a 50% share for the producer and a 50% share fro the recording artist.
It’s not unheard of for beat makers to get 50% of the publishing royalties and around 3 to 5% of the master royalties.
How much does a producer get paid?
Music producers may get a flat fee which would be a one off payment for their services. In other situations they may charge by the hour for the amount of work completed.
How much do rappers pay for beats?
Rappers buy beats at pretty much different prices.
Beats on the online market place beats can range from $1 – $2000… For established producers that work with major artists they can get between $500 to over hundreds of thousands.
The difference between publishing and royalties
Publishing is what is generated when an artists issue exclusive rights to a publishing company for the use of their music in exchange for royalties.
On the other hand royalties are what are generated when the intellectual property of the artist is used.