Recording Contracts
Musical artists are paid a royalty from the record company which is a percentage of each album sold, usually based on the suggested retail list price. Formulas are complicated and involve a number of deductions for packaging, foreign sales, older "mid-line" albums, record store "returns" etc. Unfortunately, contracts do not state how much money the artist will "net" from each unit. An attorney or accountant will be able to give the artist this figure after reviewing the formula used.
Recording budgets and payments to artists at the time of signing or recording the album are considered "advances" which is another way of saying a loan. Therefore, if a record company spends $50,000.00 making an album, and the artist is "netting" a dollar per cd sold, the artist will have to sell over 50,000 copies before receiving a penny in royalties.
Most record contracts involve multiple albums, almost always the additional albums are at the option of the company. Rarely does an artist get a guarantee that more than one or two albums will be recorded or released.