The Rights tab on your Track or Release page is where catalogue items are connected to one or more contracts to account for Sales/Returns & Costs. To what extent a contract will interact with associated revenue is defined by the Participation Rate. So, once a contract is selected the Participation Rate dictates how much revenue is to flow through the contract’s terms. Adding a Contract with a participation rate of 100 would mean 100% of the sales revenue of this track will be allocated to this particular Contract. It is then down to the royalty rates on this Contract to calculate how much of this sales revenue will eventually be paid as a royalty to the artist.
In the below example, all revenue will be allocated as an input to the Artist A contract.
In the below example, revenue would be split evenly & allocated as an input to the Artist A & Artist B contracts. Imagine this track has a total net amount of $1000; $500 will be allocated to Artist A & the other $500 will be allocated to Artist B. It is then down to the terms of these contracts to calculate how much will eventually end up on these artists their Closing Balance.
In our final example, Artist A is added to the Track with a participation rate of 100, also Artist B is added with a participation rate of 100 & Artist C is added with a participation rate of 20. Imagine this same total net amount of $1000; the full $1000 will be allocated to Artist A’s contract, but also $1000 will be allocated to Artist B’s contract & $200 will be allocated to Artist B. Effectively your total input is higher than your actual earnings, & it will be down to the royalty rates on the contract to calculate the royalty share for each artist. Make sure this is what you’re looking to achieve when adding participation rates that total to more than 100. In practice, the setup in this example reflects a Track with two primary artists & one featured artist or producer, whose royalties can then be subtracted from the primary artists via Cross Contracts.
It is worth taking a moment to look at how Participation Rates differ in relation to whether a linked contract is set as a Royalty or a Profit Share.
As a rule of thumb, for the most part, you will attach Royalty contracts at a rate of 100 & let the Sales Terms handle the calculation. For example, you may have three primary artists on a track all with different agreed royalty rates, but participating equally in the revenue generated by that track. So all three contracts are attached at a rate of 100. The exception to this would be a release product where a party is due a royalty only in relation to an element of the release. Think about a contributing artist on one track on a four-track EP. The artist is not due a royalty on any revenues generated by the other three tracks on the EP. So their contracts is applied at a rate of 25 to the EP.
In this style deal you do not need to be concerned about the sum total of all contracts.
You need to think differently about these types of deals. Let’s jump straight into an example to illustrate why.
We have a track with two contracts attached both on a 50/50 Profit Share & it generates €1. If the contracts are attached at a 100 rate, as you would were these Royalty style contracts, that €1 will flow through to both contracts for a 50/50 split calculation. Resulting in both contracts being allocated with 50€c, leaving you with nothing. Whereas if the contracts are attached at a rate of 50 each, 50€c will flow to the contracts, resulting in 25€c to each contract & leaving you with 50€c.
SALES/RETURNS vs COSTS
The function works exactly the same between the Sales/Returns area & the Costs, but is separated out as participating parties in costs typically differ from those due royalties on sales.
If however the contracts to bear the costs are the same as those due a royalty, the Copy from Sales button in the Costs area does exactly what you think it does.
PRO RATA FROM TRACKS
This button is available in the Sales/Returns on Releases only. It quickly calculates the rate for attached contracts based on how those contracts rates are set on tracks linked to the release. As such, for this tool to be effective contracts must already be attached to tracks & those tracks need to be linked to the release on the Release Overview tab.
To illustrate how this tool is useful, let’s think about a ten-track artist album that has a featured artist on one track, Track One. Whenever Track One generates revenue both the primary & featured artists are due a royalty. So both of these contracts are linked to the track at a rate of 100 (we’re keeping things simple: this is Royalty scenario, not Profit Share). Revenue generated by Tracks 2-10 are only due a royalty to the primary artist, so only this contract is attached to these tracks.
So far, so simple. But what about when the Release generates revenue?
Again, the primary artist contract is attached at a rate of 100. The primary artist is on every track on the album & so 100% of the Release Revenue is eligible for a royalty to the PA
However, the featured artist is only due a portion of the release revenue as they only perform on one track. Once both primary & featured artist (FA) contracts are selected, hitting the Pro Rata button should populate the rates of 100 for the PA & 10 for the FA. Ie the FA is only present on 1/10, or 10% of the tracks on the release & so is due a royalty on 1/10 of the revenue.
The maths in this scenario are quite simply. But imagine we have a fourteen track album, with an FA on three tracks, one producer on nine tracks with another on the remaining five & a bonus remix version of one of the FA tracks. This is where this tool comes into its own
If a Contract has a participation rate of 100, then 100% of the sales revenue for this track will be allocated to this particular Contract. It is then down to the royalty rates on this Contract to calculate how much the sales revenue will be paid as a royalty. In the most standard cases, you’ll want the total of your participation rates to add up to 100.
RELEASE SPECIFIC SALES/RETURNS
Available on the Rights tab of your Tracks, this tool allows you to allocate the revenue to a different set of Contracts, under the condition the Track revenue was part of a specific release. This is mainly a useful tool for distributors, in case two of their clients have released the same Track, by one licensing the track to the other.
In the below example, Record Label A owns the copyright of this track but has licensed their track to be featured on the compilation album “Release X” by Record Label B. The below setup will make sure revenue of this Track feeds through to Record Label A’s contract, unless it is clear the revenue of this Track was made in the context of Release X, in which case the Release Specific Sales/Returns tool will kick in & overwrite that revenue should be linked to Record Label B instead.