The theory behind this deduction is that the band pays for the packaging of the CD and tape. Typically, these deductions range from 15 to 30 percent of your royalty rate. Your royalty rate is meaningless unless it is viewed in the context of all the deductions. Not so fast. Recoupment is a fancy word for pay back.
Record companies expend a lot of money on bands.
They pay for all the studio time, give the band an advance, promote the band, etc. All of this money is a loan to the band which the band must pay back. This is recoupment. The band pays back the record label out of their royalties. Once a band sells enough records to pay back the amount to the record label, the band has recouped and will receive royalties on future record sales.