I’m not much of a punk rock guy, but I know this is pretty cool.
As part of the sale, all bands on Fat that are “in debt” to the label, will have their debt wiped out. That is, if a band had an advance that was not yet recouped, that balanced owed is zeroed, so that if the band sells a single royalty at Hopeless, they will begin earning royalties immediately. (Often when a band signs with an independent label, the expense of record production is granted as an “advance.” When the band’s music earns money, the money earned is first counted against the advance. So, a band usually does not earn any money until the advance is paid back through royalties earned on record sales).
Even more interesting is that Erin and Mike essentially paid off the debts themselves. That is, say the cost of Hopeless buying Fat was valued at $100. In this sale, Hopeless only paid $80 to Erin and Mike, due to the fact that Erin and Mike required that band debt be wiped out upon the sale. As far as record label sales, this is a rather monumental and magnanimous move on the part of Erin and Mike. In fact, the debt forgiveness cost Erin and Mike about $3.5 million.
via Punk News