Contracts – Terms in a Master Deal

Contracts – Terms in a Master Deal

The royalty rates, how costs are to be considered & any deductions liable are laid out the Terms tab.

SALES

In the Sales area you set the royalty rates for revenues generated in specific scenarios. For example, you may apply a different rate on a sale of a physical product versus a digital download. Or merchandise might be treated differently depending on the country of sale.

As such, the first line of a term can be read as an “If” & the second line can be read as a “Then”. ie If revenue matches the set criteria, Then apply this royalty rate.

If Variables

The following types of if variables are for you to specify the conditions under which to apple a royalty rate. You can configure the menu options available for each type via the Settings area.

Cat Type – Do you need to apply a different rate from Releases to Tracks? With the Cat Type “Contract” you can specify a rate for sales lines linked directly to a Contract but not simultaneously linked to a Track or Release.
Cat Group – Tracks or Releases can be combined in groups for rates applying. For more information on how to assign products to groups see the Catalogue Group article.
Territory – Rates can be dependent on the territory where the revenues are generated. It is possible to create Territory Groups in Settings, so you can combine multiple territories as required
Channel – The overarching concept of revenue type (Sync, Live, Merchandise, Digital products, Physical recorded products etc)
Config – A format that dovetails into the Channel, for eg:

  • Channel ‘Digital’ : Config ‘Download’
  • Channel ‘Physical’ : Config ‘LP’
  • Channel ‘Merchandise’ : Config ‘T-Shirt’

Price Cat – This will match the price categories in settings
Source – Do you need to treat revenue generated by particular sources in certain ways? Perhaps monies generated by views on YouTube have a rate that differs from streams on Amazon Music

Then Variables

The following then variables state the royalty rate to be applied to revenues meeting the conditions above.

Deal Type – Select what type of revenue to use as the base to calculate your royalty rate on. The different types of deals work in the following ways:

  • Gross Receipts – The rate is applied to the gross amounts in the sales data ie before the Source takes their share (think before distribution fee). The value stored in the Gross Amount field will be taken as the calculation input.
  • Net Receipts – The amount paid to you. The value stored in the Net Amount field will be taken as the calculation input.
  • PPD – Stands for Published Price to the Dealer. This is a fixed price per unit that you pay the royalty on, regardless of what revenues are generated by a sale. The PPD is set against a Release, under the Dealer Price field.
  • Unit Price – Takes the Per Unit Rate field in the sales data. It acts similar to a PPD, but loads the price from the sales data, rather than from the catalogue. Often used in situations similar to PPD, but where the unit price varies based on what you have been paid.
  • Retail Price – The value stored in the Retail Price field will be taken as the calculation input.
  • Unit Rate – This is a specific royalty amount per unit set on the term. You pay the specific rate per unit regardless of what revenues are generated. This is often used for specific compilation deals or penny rates on samples. On selecting this option, you will see an extra field for the Unit Rate. Make sure you complete this value in the Contract’s currency.
  • Fixed Unit Rate – Similar to the Unit Rate, the Fixed Unit Rate calculates the royalty based on a set value set in your term. The difference with a standard Unit Rate, and all other Deal Types in fact, is that Fixed Unit Rates ignore the Participation Rate. So no matter with which Participation Rate this contract is attached to a Track or Release, the full Fixed Unit Rate value will be used as the calculation input. Make sure you complete the Unit Rate in the Contract’s currency.
Whichever deal type you select, be sure your Sales Template always captures the relevant values when inputting sales data onto Curve. For example if you work with Gross Receipts deals, make sure you capture the Gross Amount; same with Net Amount, Per Unit Rate & Retail Price for Net Receipts, Unit Price & Retail Price terms respectively. Sometimes this data may not be shown explicitly in your sales statement, and you may need a Copy Field (eg to copy data from the Net Amount to Gross Amount column) or a Calculation (eg to divide Net Amount by Units and store this in the Per Unit Rate field) to make sure the correct base is stored in the correct field. If you work with PPD deals, make sure a PPD value is given with your Release.

Rate % – The royalty rate to be applied in these circumstances. IMPORTANT – this is the payee’s share. So if you have an 80/20 Royalty deal in your favour, the value to enter is 20. For Profit Share deals you probably want to enter 100 here and let the Profit Share Split on the overview tab handle the calculation.
Multiplier – A multiplier, as you would have guessed, multiplies the royalty. A multiplier of 0.5 will halve the royalty output, a multiplier of 2 doubles the royalty & a multiplier of 1 or or blank multiplier will leave the royalty as is.
Reduction % – This functions similarly to a multiplier but is scaled to 100 – so a value of 100 is 100% of the revenue. Or a reduction percentage of 50 would halve the royalty, a reduction percentage of 75 would turn $10 into a $7.5 royalty.
Reserve % – Set an amount of revenue to reserve against this type of sale (typically used on physical products to protect against potential future returns). Entering 20 would take a $2 reserve on a $10 sale. To release the reserves you must set a schedule on the Reserves tab, as explained in the Reserves article.

Curve calculates the most specific terms first

To any given sales line, the contract will always apply the Sales term that is most specific. The term that is deemed most specific is the term with a set condition highest up in the hierarchy. The hierarchy goes from left to right, so from Cat Type > Cat Group > Territory > Channel > Configuration > Price Category > Source.

So for example, a term with a Territory condition is deemed more specific than a term with a Channel condition. A term with a Territory condition is also deemed more specific than a term with both a Channel and a Configuration condition.

Examples

Let’s take a look at some examples of Sales terms.

The General Term – The below example has no conditions specified and will apply a royalty rate of 50% to the Net Receipts of every single sales line.

Curve calculates the most specific Term first – The below example has one general term & one term specified for digital revenue. The order of the terms is inconsequential, Curve will always run the figures for the most specific term first. In this example, a royalty rate of 60% of the net receipts will be calculated on any digital revenue. Any remaining revenue not captured as Digital (ie Physical, Merchandise etc) will have a 50% rate applied.

Terms that don’t cover every sale – In the below example, we have specified a term for physical and digital revenue. If there is a sales line that does not fall into these two categories, no royalty would be calculated. We generally advise to always set a general term to capture revenues not captured by your subsequent specific terms. But you may have reasons against this, for example if you only want to report on a specific type of revenue.

The hierarchy of multiple terms with different conditions – The following terms specify a 50% royalty rate of net receipts for any digital revenue & a 25% royalty rate for revenue from the United States. Of course, it is possible that revenue is both Digital AND generated in the United States. It is always the if condition that is most left on the term that will get the upper hand. In this case the Territory will be calculated before Channel, so Digital revenue from the United States will be applied a 25% royalty rate.

If this is not how you need the calculations to work, you can mitigate this by adding an extra Term that defines the rate for Digital revenue originating from the US. See the third term on the following example. All digital revenue will now receive a royalty rate of 50%, with non-digital revenue from the United States receiving a royalty rate of 25% of the net receipts.

One more example on the hierarchy of conditions – The following example contains a mistake that is easy to make. We have specified a term for Digital revenue, and a term for Youtube revenue. As Youtube is a digital source, the revenue from this source will most likely always be mapped to the Channel “Digital” and the Source “Youtube”. As Channel specifications always take the upper hand on Source specifications, Digital Youtube revenue would be applied a 50% rate of Gross Receipts.

This discrepancy can be resolved as shown in the below example. By setting the Channel on the second term to Digital too, this term now becomes more specific than the first term. Revenue mapped to the Channel “Digital” and Source “Youtube” will now be applied a 30% rate of Gross Receipts.

The order you add the Terms is inconsequential. The most specific Term is always applied first. In cases where terms overlap, the system works from left to right through the conditions to run calculations. So it will filter first on Cat Type, then Cat Group and so on to Source.

A more specific royalty rate – let’s have a look at an example with a more complicated royalty rate. The following term will apply to every sales line

  • a 50% royalty rate to the gross receipts
  • multiply it by 1.3
  • reduce it to 75%
  • take a 10% reserve

The below table shows what the royalty would be for a sales line with initial value 10.

Gross Receipt

After Rate %

After Multiplier

After Reduction

Reserve

10

5

6.5

4.875

0.4875

 

DEDUCTIONS

You may need to deduct royalties from a balance under certain conditions. Deductions work in a similar fashion to sales terms. You are able to deduct either a percentage or a unit rate from a revenue, & it can be done either before (Pre-), or after (Post-) the sales term calculation that relates to the programmed deduction.

The above setting deducts 33% of the revenue of a physical sale in the United States before a royalty is calculated. For example if $100 of physical sales revenue is generated in the United States, this Deduction means that the royalty is calculated on $67. If the Deduction Type were set as Post Calculation the 33% would be deducted after the royalty calculation. So if the contract had a sales term of 20% royalty for physical revenues in the US, the 33% would be deducted from the $20 royalty resulting in $13.4 being due to the payee of this contract. As you may have noticed, as we work with multiplications the Deduction Type does not affect the bottom line ($100 x 0.67 * 0.20 = $100 x 0.20 * 0.67).

The above example is a Unit Rate deduction and deducts 0.66 (33% rate of the unit rate 2) from this artist’s royalty per physical sales unit in the United States. In the case of Unit Rate deductions, the deduction type does affect your bottom line. Let’s imagine we sold 10 units in the United States with a total revenue of $100, with the artist on a royalty rate of 20% of net receipts. In this Pre-Calculation example, $100 will be deducted by $6.60 (the 10 units multiplied by the deduction unit rate of $0.66), then calculate the artist’s 20% royalty which results in a bottom line of $18.68. In the case of a Post-Calculation, we account 20% of $100 to the artist first (=$20), then deduct $6.60 from his/her royalties, which results in a bottom line of $13.40.

 

MECHANICAL DEDUCTIONS

For a detailed explanation of how to configure mechanical deductions please refer to the Mechanicals article.

 

WITHHOLDING TAX DEDUCTIONS

If you are looking to apply a Withholding Tax to the closing balance of your artists, you can do so using the Withholding Tax field of their Payee. Please visit our documentation on Payees for more information.

If you are looking to apply a Withholding Tax to your artists only for specific sales, do so via the Withholding Tax Deductions term on the relevant contract. The total Withholding Tax deductions will appear on the artists their Statement Of Account.

The WHT Tax deduction terms function as any other term type on Curve. The below example is deducting a WHT of 15% from the artist, but only for revenue made in France. Pre-Calculation means the WHT will be deducted from source, Post-Calculation means the WHT will be deducted from the artist’s royalty.

The Deduct Withholding Tax option on the Overview tab of your Contract needs to be enabled in order for this WHT to be deducted from the artist’s royalty.

COSTS

Costs terms are much simpler than Sales or Deduction terms, but work in a similar fashion: you specify the rate at which you want to recoup costs. Rates can alter dependent on the territory and the type of cost. A rate of 100 means the cost is fully recouped against the contract balance & a rate of 50 recoups half of the cost against the contract. As with sales terms, it is always the most specific cost term that is calculated first. Cost categories can be added or deleted as needed on the Settings page.

In the example below, video costs would be recouped at 50%. Tour costs, but only those accrued in the United Kingdom, will be recouped at 80%. We have a general cost term which means anything not captured by the other two more specific terms will be recouped at 100%.