“Cross-Collateralization” (sometimes called offsets) is the process by which the monetary liabilities you accumulate for the duration of your contract, including advances that you have not repaid, are reimbursed from the earnings of future albums or publications. (e.30) Suppose you receive an advance of US$100,000 for your first album and an advance of $100,000 for your second album. You owe the label $200, 000. They won $10,000 in royalties from the first album and $120,000 in royalties from the second album. (e.31) Although it may seem like you made money with the second album ($120,000 in copyright, $20,000 more than the $100,000 advance), the tanticles on both albums are collected for a total of $130,000. The $200,000 advance will be refunded from this amount. So you still owe the $70,000 label, which will be transferred to your next album, and you`ll be added to your next progression. (e.32) In other words, this obligation never disappears until it is paid. Cross-insurance can be particularly damaging if you sign both a registration contract and a publication contract with the same company, and both contracts provide that advances from both contracts can be repaid under licensing fees. This is a situation you want to avoid if possible.
(e.33) As explained in the “Mechanical Charges” section, publication is a significant potential source of revenue for you when you write your own songs, and you must do everything in your power to isolate this income from cross-insurance. The first chords that would be necessary would be those to obtain different rights: a) The right to record compositions by other musicians. (This result is achieved through the acquisition and execution of a contract called a mechanical license); (b) The right to use cover art – Normally, the musician and/or record company enter into an agreement with an artist to create a type of cover for the CD. This agreement should specify who owns the art, how the work of art should be used and the period during which compensation for the use of the artwork is to be paid; and who owns the copyright to the artwork; c) The right to use Liner Notes – An agreement should be used to assign an author to create Liner Notes, which should indicate how Liner Notes should be used and for what period, compensation must be paid for the use of Liner Notes and who owns the copyright of the Liner Notes.