Bundling Clauses That Crush Your Per-Unit Rate - Traps & Scams Every Musician Must Avoid

If a contract smells like free merch and mystery math, it probably is a bundling trap. You loved the shiny offer. You imagined vinyl, a small advance, maybe a PR blitz. Then you read the clause where every single thing you make money from is counted together and then paid back to the label, platform, promoter, or manager according to a secret formula that makes your per unit income look like pocket change. Welcome to bundling clauses. They are legal haze with a money vacuum in the middle.

This article is your knockout guide. We will define bundling clauses in plain speak, show exactly how they crush your per unit rate with math so clean you can bring it to a negotiation, reveal the everyday tricks labels and aggregators use, and give you battle tested clause language and negotiation scripts. We will also walk you through audits, carve outs, and exit plans. You will leave knowing what to sign and what to toss in a dramatic email to your lawyer.

What Is a Bundling Clause

A bundling clause is contract language that pools multiple revenue streams together and treats them as one revenue pot for accounting and royalty calculations. Instead of paying you a clear percentage on a single revenue stream like album sales or streaming, the contract aggregates income from different sources then applies a single formula that often benefits the company you just signed with.

Translation for humans: imagine you sold a T shirt for twenty dollars, your song was streamed for a thousand plays, and a ticket bundle sold for forty dollars. A bundling clause could let the company mix all that money into one bucket then calculate your share as if every unit was worth the lowest common denominator. That means merch money and ticket money can get counted like low paying streams. It also allows a company to recoup costs from multiple pots. You worked hard. Bundling can hide what you actually earned per item.

Terms You Must Know Right Away

• Per unit rate means the income you get for one sale or one stream once all cuts are taken. If you sell a digital single for one dollar and get twenty five cents after splits and fees then your per unit rate is twenty five cents.
• Net receipts means the money left after the company deducts costs. Net receipts sounds innocent. In contracts it is often a black hole where expenses vanish.
• Recoupment is the process where the company takes back the advance or costs from your future earnings. If a label gives you five thousand dollars and says they will recoup from net receipts, they will take money from the pooled revenue until they are whole.
• 360 clause is an agreement where the label or company takes a cut of multiple income streams such as recording, touring, merchandise, and endorsements. Bundling clauses are often paired with 360 clauses to make nutrient rich sludge for the company.
• Most favored nation often shortened to MFN means the company can match the best deal given to anyone else. That can allow a company to claim they are being fair even while everyone loses.
• Aggregate means combined. When a contract says aggregate revenues it usually signals bundling.

Why Companies Use Bundling Clauses

This is not mysterious. Companies want flexibility and margin. Bundling clauses let them:

• Attach multiple revenue types to one accounting process so they can recoup costs fast.
• Move money from high paying sources to low paying ones on paper so artist percentages are effectively reduced.
• Hide detailed splits behind consolidated statements so small deductions do not look abusive one by one.
• Offer an apparently big deal up front while quietly widening their revenue base later.

Imagine the tactics like a magician. One hand shows freebies. The other hand moves the dollars into a secret pocket labeled administrative fees. The trick works because most artists are not reading the fine print with a calculator and a rage diary.

How Bundling Crushes Your Per Unit Rate

Numbers do more damage than opinions. Here is a step by step model you can use to show exactly how a bundle lowers your per unit rate. We will use a simple scenario then expand it.

Scenario A: No Bundling

Pop single sells digitally at one dollar per download. After platform fees and distribution you receive seventy cents. Label takes twenty percent of that as your royalty. You get fifty six cents per sale. That is your per unit rate for that sale.

• Sale price one dollar
• After platform fees and distributor seventy cents to artist pool
• Artist royalty twenty percent of seventy cents equals fourteen cents
• Artist per unit rate fourteen cents

Yes this is already low for many real world deals but it is clear and measurable.

Scenario B: Same Sales With Bundling Clause

Now the contract allows the label to bundle digital sales with merchandise and ticket bundles. The label sells a bundle: a digital single plus a shirt for twenty dollars. They allocate the revenue such that the single counts as one unit but they use a weighted allocation where twenty percent of bundle revenue is assigned to the single stream. The math looks like this.

• Bundle price twenty dollars
• Label assigns twenty percent to the single equals four dollars attributed to the single
• Platform or merch costs reduce that to three dollars in net receipts
• Label applies artist royalty twenty percent of net receipts which is sixty cents
• Artist per unit on that single is sixty cents instead of fourteen cents estimated earlier

That looks like the artist is getting more right now. But wait. The label then counts that sale as a unit toward recoupment and toward overall unit thresholds for higher rate tiers. They can also retroactively adjust allocation. The label then says achievements for higher royalty tiers will be calculated after deducting packaging and promotion costs from the aggregated pool. They can water down future bump thresholds. In many bundles labels design allocations to make the artist appear to have sold units while insuring the overall net receipts remain low.

Here is a clearer example of how your effective per unit actually decreases when multiple products are pooled and costs are taken out of the pool before your royalty calculation.

Concrete Calculation Example

Assume these monthly revenues from an artist:

• Digital downloads 1,000 units at one dollar each equals one thousand dollars
• Streaming revenue allocated as revenue share equals one thousand dollars
• Merch sales equals two thousand dollars
• Ticket bundles equals one thousand dollars
• Total gross revenue equals five thousand dollars

Now suppose the contract allows the company to deduct costs and apply a single artist royalty of twenty percent on net receipts. Company deducts production costs, promotion, shipping, platform fees, and a broad administrative fee that together equal three thousand dollars. Net receipts then equal two thousand dollars. Artist royalty twenty percent of two thousand equals four hundred dollars. So total payout to artist across all items is four hundred dollars and effective per unit across all sales if you count the two thousand units combined equals twenty cents per unit.

Compare that to if each stream had its own clear split and costs allocated within categories. You might have ended with much higher per unit for downloads and merch. Bundling transformed a situation where downloads might have paid better into a pooled low per unit payment. That is how bundling crushes your per unit rate.

Common Bundling Tricks and Wording To Watch

Contracts love vague terms. That is their oxygen. Here are the exact phrases and tricks that should trigger a scream followed by a lawyer email.

“All revenues” or “all gross revenues”

That usually means everything you earn is pooled together. If it applies to recoupment it means advances and costs will be paid from the entire pool, not categorized income. Ask what incomes are excluded and request that physical product income be separated from streaming and from merch.

“Net receipts” with broad deductions

Net receipts can be fine if the deductions are defined and reasonable. The trap comes when the contract lists a wide set of deductible items with no caps and no examples. Administrative fees of ten percent of net receipts sound small until they compound with packaging, return allowances, and shipping. Ask for a list of deductible items with specific percentage caps or fixed fee alternatives.

“Any format now known or hereafter devised”

This phrase lets the company bundle future revenue types you cannot yet imagine into the same pool. That could include NFTs, blockchain income, branded content revenue, and more. Insist on a carve out for future formats or a requirement that new formats be negotiated separately with artist consent.

Allocation clauses that say the company may allocate revenues as it sees fit

This is where the label gets to decide what portion of a bundle counts as a single sale. You want explicit allocation rules based on market value or independent third party valuation. Do not leave allocation to unilateral company discretion.

Most favored nation applied to bundled deals

If the contract says the company can match whatever favorable terms are offered to others then you can be forced into a lower rate because the company can argue they are giving you the best terms relative to others. Clarify whether MFN applies per revenue stream or per bundle type.

Recoupment across categories

When the label recoups recording costs from all categories including touring and merch you are effectively subsidizing the label with income that would otherwise pay you more. Negotiate category specific recoupment or a recoupment cap per revenue type.

Real Life Scenarios Musicians Face

Here are three true to life examples with names changed to protect the outraged.

Scenario One: The Vinyl Plus Ticket Trap

Sasha signed with an indie label that promised a vinyl pressing and a small tour support payment. The contract included a bundling clause that allowed the label to include ticket bundle revenue in net receipts. The label sold VIP bundles with a free vinyl and a meet and greet. They allocated only five dollars per bundle to the VIP meet and greet and fifty cents to the vinyl. The label used those allocations to count units toward Sasha hitting a sales threshold that would increase royalties. When the threshold was reached the label reclassified promotional costs into the bundled pool and declared the threshold not met. Sasha ended up with significantly less than expected. Negotiation win would have been explicit allocation rules and an agree to independent audit of allocation when thresholds are disputed.

Scenario Two: The Distributor That Eats Merch

Rodrigo used an aggregator for streaming and sales. The aggregator offered an optional merch fulfillment program with a lower distribution fee if Rodrigo used it. Rodrigo agreed and the contract said that merch revenue could be offset against streaming revenue for recoupment. When Rodrigo saw the first statement the merch costs were huge because shipping and packing were billed by a mark up. The aggregator then used the bundled pool to offset a marketing advance. Rodrigo’s per unit streaming payout looked tiny on his statements. A better move would have been to keep merch and streaming separate or demand a fixed cost per item for merchandising that could be audited.

Scenario Three: The 360 Manager That Counts Everything

Layla signed a management deal where the manager took a percentage of what the contract called consolidated receipts. The manager had a list of services they covered and the company could recoup costs across those services. The manager put a sizeable charge for influencer marketing and a large charge for admin. With the combined charges most revenue ended up in the consolidated receipts and Layla received almost no direct payout for a long stretch. A clean clause would have required separate accounting per revenue type and a detailed expense pre approval process for anything above a reasonable threshold.

How To Negotiate Bundling Clauses Like a Human With Teeth

Negotiation is mostly about removing fog and adding windows. Ask for clarity. Ask for caps. Ask for carve outs. Ask for audit rights. Ask for examples. Here are specific asks that work in the real world.

Ask for clear revenue buckets

Demand that revenue types be separated into clearly defined buckets such as recorded music, live performance, merchandise, sync licensing, and endorsements. Require that recoupment and royalty calculations be performed within each bucket. That prevents a company from draining merch to cover recording advances.

Cap deductions

For any cost that can be deducted from a bucket ask for a percentage cap or a per item cap. For example ask that fulfillment fees for merchandise be capped at fifteen percent of gross merch revenue or be a fixed fee per item. If the company refuses ask for a third party fulfillment requirement and a cap on mark up.

Define allocation rules for bundles

If bundles are allowed then require allocation to follow objective rules. For instance allocate by retail price attribution or by comparable market value. Require that allocations be fixed in the agreement and that any change must be agreed in writing.

Exclude certain revenues from recoupment

Insist that touring gross, merchandise gross, and third party sync fees be excluded from recoupment for recording advances. If the company wants a cut from those streams then negotiate a specific separate percentage rather than allowing full recoupment across all categories.

Require a most favored nation carve out or limit

If MFN is insisted upon ask that it apply only to the exact revenue type and that it not allow retroactive changes to past deals. Alternatively ask for an MFN credit to be paid to the artist if the company uses MFN to reduce your economics later.

Insert audit rights and detail the process

Audit rights are essential. They must be periodic and not require huge advance notice. Put a cap on the number of audits per year and define that the company must cover costs if the audit reveals discrepancies above a small percentage. Include a requirement that the company provide raw transaction level data on request with standard formats like CSV.

Set up transparency on allocations and accounting software

Insist the company provide statements that show allocation per item. If possible require they use recognized accounting software or provide CSV exports on request. This makes life easier and reduces the ability to hide fees inside other line items.

Sample Language That Helps and Language That Kills

Contracts are words that do things. Here are friendly edits you can propose and defensive lines you should fight immediately.

Good clause examples to propose

Acceptable language you can offer your counterpart.

Revenue from recorded music, merchandise, live performance, synchronization, and endorsements shall be accounted for in separate revenue categories.  No costs shall be cross charged from one revenue category to another for the purpose of calculating artist compensation or recoupment without the artist's prior written consent.  Allocations of revenue in any commercially offered bundle shall be made according to the relative retail price of the constituent items.  Artist shall have the right to audit the company's books related to each revenue category once every 12 months upon thirty days written notice.  If an audit reveals an underpayment exceeding two percent of amounts due then the company shall reimburse the artist for the reasonable cost of the audit.

Note how this removes cross charging and defines allocation by retail price. It also gives an audit remedy.

Bad clause examples to reject

Language that should make you pause and throw your pen down dramatically.

All gross revenues earned or received by the company from any activity relating to the Artist shall be aggregated and accounted for as net receipts and applied against recoupable costs in the company's absolute discretion.  The company may allocate revenues among categories and bundles as it deems appropriate without further notice to the Artist.

This clause gives the company broad unilateral power. It is vague and invites abuse.

Checklist To Use Before You Sign

• Is revenue pooled across categories? If yes ask for separation into buckets.
• Are deductible costs defined and capped? If no propose caps or fixed fees.
• Are bundle allocations left to the company? If yes demand allocation rules based on retail value or independent valuation.
• Is recoupment allowed across categories? If yes push for exclusions for touring and merch or for separate recoupment schedules.
• Is MFN present? If yes limit application to identical revenue streams and limit retroactivity.
• Do you have audit rights? If no add them and include a cost shifting clause if underpayment is found.
• Does the company have to provide itemized statements? If no demand CSV level transaction exports on request.

Negotiation Scripts That Do Not Sound Like a Robot

Say this in a friendly but firm way. You are not begging. You are doing business.

Script: For an indie label that wants bundling

Hey Sam, I love the plan for the vinyl and the tour push. One thing I want to clarify is how bundle revenue will be allocated. I am asking that revenue types remain separate for accounting and that bundle allocations follow retail value. I do not want touring and merch to be used to recoup recording costs. If we can agree to that I am ready to move forward.

Script: For a distributor offering merch fulfillment

Thanks for the merch program. I will use it if we can agree to a fixed fulfillment fee per item or a cap at fifteen percent of gross. I also need the merch income excluded from any recoupment of marketing advances. If that works I will sign up today.

Script: For management that wants a consolidated percentage

I appreciate the management offer but I need separate accounting for touring, merch, and recorded music. I am willing to give a management commission on touring gross and merch gross separately. I cannot agree to a consolidated cut across all revenues because it creates a conflict when we choose investment priorities.

What To Do If You Already Signed a Bundling Clause

Do not panic. Here are practical steps.

1. Get a copy of the exact clause and read it slowly while pretending you are a villain in a courtroom drama. Highlight every occurrence of aggregate, net receipts, allocate, and recoup.
2. Ask for statements and CSV exports of transaction level data. Often this is not given unless requested. You have a right to understand how revenue was allocated.
3. Hire someone to do a one time audit if the sums involved justify it. Many audit firms work on contingency. If the audit reveals underpayment you can recover audit costs under many contracts.
4. Negotiate an amendment to the contract. Point out areas where allocations can be clarified and where carve outs can be added. Use recent numbers from the statements as leverage.
5. If negotiation fails consult counsel about breach of fiduciary duty or misrepresentation. This is expensive but sometimes necessary for large deals.

How Bundling Affects Streaming and DSP Deals

Streaming platforms often operate with their own internal bundles like playlists that include multiple artists. Aggregators and labels can then allocate streaming royalties across a corpus. You need to watch for clauses that let a company treat streaming income as fungible with physical sales or merch. Streaming is complicated so here are the main points.

• Streaming royalties are usually paid by platforms either as a pro rata share of subscription pools or as a per stream rate depending on the platform model. Do not let a company convert high value sync fees or ticket revenue into low value stream equivalents in accounting.
• Be careful with clauses that allow companies to convert streams into equivalent units for threshold purposes. If they count one thousand low paying streams as a physical sale then ask for a transparent conversion formula and a cap on how often that method can be used.
• If you are signing with a DSP partner ask for streaming and sales to be carved out from any bundle used for recoupment of advances. If that is not acceptable then require a lower recoupment rate for streaming income because the per unit economics are different.

Audit Red Flags To Watch For

If you get statements and CSV files watch for these patterns.

• Allocations that shift retroactively without explanation.
• Administrative fees added as vague lines such as platform services or processing fees without invoices.
• Large inter company charges labeled as promotional or marketing with no detail.
• Bundles that use suspicious allocation percentages such as attributing ninety percent of a bundle to a low paying stream.
• Lack of transaction level data or refusal to provide bank deposited receipts for third party sales.

When To Walk Away

Contracts are compromises. But some compromises are sinkholes. Walk away when one or more of these apply.

• The company refuses to define revenue categories and insists on unlimited recoupment across all sources.
• The company refuses to allow audits or to provide transaction level data on request.
• Allocation language gives unilateral control to the company with no objective standard.
• The company wants you to sign a 360 style commission that covers all revenue and refuses to provide carve outs for touring and merch.

There are always other options. A solid DIY route, a better label, a direct to fan approach, or a cleaner manager will often be better than a toxic contract.

Action Plan You Can Use Today

1. Find your current contract and highlight every use of the words aggregate, net receipts, allocate, recoup, and any format. Save a screenshot.
2. Request transaction level statements and CSV exports for the last twelve months. Demand these in writing so you have proof they received your request.
3. Run the simple math shown in this article on your numbers to calculate your effective per unit rate under the current accounting. Bring the spreadsheet to negotiations.
4. Send a short amendment proposal with the good clause language above and your requested caps. Use one of the negotiation scripts in this article as an email opener.
5. If you suspect misallocation hire an auditor. If the business is small ask for a contingency audit agreement.

FAQ

What is the fastest way to spot a bundling clause

Search the contract for the words aggregate, net receipts, allocation, recoup, and any format. Then look for language that allows the company to combine all revenue sources or allocate revenue at their sole discretion. If you find any of those things you likely have a bundling clause and you should ask for specific revenue buckets and allocation rules.

Will building my own merch store protect me from bundling

It helps if you control the merch fulfillment and the bank accounts. If your merch revenue goes through a separate entity that you control and the contract does not permit the company to pull third party revenues into recoupment then you are safer. Contracts with wide net receipts language can still try to claim income if they control aspects of the relationship. Separation of accounts and a clear clause excluding independently run merch from recoupment are both important.

Can a record label allocate more to streaming in order to lower my royalties

Yes if the contract allows unilateral allocation. That is why allocation rules are critical. Require allocation by retail value or market comparable. If the contract gives the label unilateral power to allocate then you are vulnerable to creative accounting that reduces artist payouts.

How do most artists get burned the worst by bundling

Artists get burned when they accept a big advance with vague accounting and recoupment across categories. The label or company then funnels multiple revenue streams into the recoupment pool and uses broad deductions to shrink net receipts. Over time the artist sees small or zero statements while the company claims it has not recouped. The worst burns happen when the artist lacks audit rights and cannot see transaction level data.

Is it possible to negotiate away a bundling clause after signing

Yes. You can negotiate an amendment. Having transaction level data and a clear calculation of how your effective per unit rate was lowered gives you leverage. Sometimes companies prefer to amend to keep an artist. If the company refuses you can discuss termination or legal options depending on the damages but those are higher cost paths.

Get Contact Details of Music Industry Gatekeepers

Looking for an A&R, Manager or Record Label to skyrocket your music career?

Don’t wait to be discovered, take full control of your music career. Get access to the contact details of the gatekeepers of the music industry. We're talking email addresses, contact numbers, social media...

Packed with contact details for over 3,000 of the top Music Managers, A&Rs, Booking Agents & Record Label Executives.

Get exclusive access today, take control of your music journey and skyrocket your music career.

Unlock Instant Access