Your Favorite Rapper is Poor: The Curse of the Advance Edition Posted by Nathan S. on 05/18/10 | Filed under Top Stories, Features, Your Favorite Rapper Is Poor

(Note: This is part of an ongoing series breaking down the truth behind hip-hop's smoke and mirrors financial game. For previous entries, click here.)

As I detailed in yesterday's Your Favorite Rapper is Poor, far from the images of models wearing diamonds while driving diamond-covered Bentleys full of models wearing diamonds, it's not only completely possible for a new rapper to sell one-million copies of his hit single and be in massive debt, it's the norm. But if that's true, then where are they getting the money to buy their chains in the first place? One word: advance.

Just like "under-privileged" is a polite term for poor, "advance" is a polite term for "money you're going to have to fucking pay back." Let's return to our imaginary aspiring rap star MC Wanna Be. Having crafted his aforementioned hit single and attracted the attention of a major label, Wanna Be signs a deal with Rip Off Records. While the terms of the deal are terrible, taking 90% of his earnings and making him pay for guest features and production work, Wanna Be is too blinded by his $500,000 advance to really care. No one's ever handed him a check for that much before. He's ecstatic.

Of course what he doesn't fully realize at the time is that he has to pay the money back, and he won't be paying it back voluntarily. In most deals with unestablished artists record labels contractually
"recoup" an artist's earnings until they've paid back their full advance. In other words, remember the measly $65,000 that Wanna Be made off his hit single? He's not seeing a dime of that. The records label's taking it all and applying it to his balance. Which means he's only got $435,000 to go until he's paid it off and the money starts flowing trickling in!

And that's not all. If Wanna Be's not careful, and we've already established that unfortunately like most young artists that don't know the intricacies of business he's not, the label will lay claim to almost any income he earns that's even remotely music-related (we'll cover "360 deals" later). That concert where he pulled in $10,000? Recoup! The $5,000 he got paid to appear in that Sprite commercial. Recoup!

Of course Wanne Be wasn't thinking of any of this when he first got that advance check, so he went out and bought a house and two new cars. At first the $15,000 car and house bill he's paying every month seemed measly compared to his advance, and of course further riches were right around the corner, but it's been months and after the label's done with their recoups he's hardly got any income at all. That's right, he'd be making more money every month if he was on unemployment, but you'd never know it looking at his palatial estate and brand new Bentley. And yes, this is how MC Hammer can sell platinum albums and still end up filing for bankruptcy.

The lesson? Make sure you hire a damn good lawyer before you sign any contract.

Stay tuned - next time I'll cover the concept of "gifting". Or as I like to call it, "de facto pimping."