Warner Music Still Pays Hundreds of Millions In Artist Advances…

That is, more than $300 million on the books right now. And that doesn’t count the losses that are written off, never to be recouped again. According to the latest financial disclosures by Warner Music Group, the label carries an outstanding balance of $318 million on all of its artist advances, with expectations of recouping a substantial percentage after one year (good luck with that). 

Here’s the specific breakdown, listed under ‘assets’ by the label for the most recent quarter

And the conclusion?  If you love ATM machines, you’ll love a major label deal.  But why are advances still needed, especially in 2012?  In the ‘old days,’ an advance would be used to lure an artist, provide tour support, or help to finance a period of more focused creativity.  That is, with the proper studio time and producers, and without day jobs and other pedestrian monetary distractions.

That structure may still make senses for superstars – which are the major’s forte – and a nice lure for big names.  But in a scrappier, quick-release climate of today, the wholesale advance seems like a luxury – especially with artists often coming to the table with content (and even solid fanbases) pre-baked. 

Of course, a band wouldn’t turn down what’s effectively free money, but does this really make sense for either side?  According to one top major label executive we spoke to, advances can make it easier for labels like Warner to employ lots of shady accounting practices, on a fairly broad level.  That is, all recouped against artist accounts and often never discovered – even after subsequent audits.  “There’s actually still all kinds of shady stuff still being recouped, like ‘breakage’ and ‘packaging deductions,'” the executive said, without pointing to WMG specifically.  “[The advance] is a great place to tuck all those things.”

Source: Digital News