and reserves are the two most powerful levers in a account. They are also the two most misapplied.
A client is three years into a deal. The catalogue generates meaningful . The shows zero payable, every period. They assume they are still "unrecouped". The files this under "normal" and moves on.
Six months later, an audit reveals has been applying to fees, which the deal does not make recoupable. The advance should have been recouped eighteen months ago.
Recoupment and reserves sit in adjacent rows on a royalty statement. They operate by completely different rules. Confusing them (or applying either incorrectly) produces over-payment, under-payment, or both, across every . The two disciplines are:
Recoupment: the contractual mechanism by which the label recovers an advance from the artist's royalty share. Governed entirely by the recoupment clause: which income streams are included, at which rate, and whether links projects.
Reserves: a contractual against potential future (returns, credits, chargebacks). Governed by the reserve clause: the permitted percentage, the income base it applies to, and the mandatory liquidation timetable.
Neither is optional and neither is discretionary. Both must trace to specific contract language.