What is Recoupment?

• A. The artist receives an advance before any sales.
• B. A recoupment clause allows the distributor to terminate the contract.
• C. The distributor has the right to recoup an advance before paying an additional share of the revenues.
• D. Recoupment means the distributor pays all revenues upfront.

Answer: (C)

Recoupment is the process by which the label or distributor recovers money it advanced to the artist (and certain related costs) out of the artist’s future royalties before the artist starts receiving additional payments. In practice, the artist signs an advance and other recoupable costs are incurred; when the catalog starts earning revenue, those earnings first go toward repaying that advance and the costs, and only after recoupment is complete do the artist begin to receive subsequent royalties. This is why the correct choice states that the distributor has the right to recoup an advance before paying an additional share of the revenues. The other statements miss the concept: it’s not about an advance being given before any sales in general, not about termination rights, and not about paying all revenues upfront.