A mechanical is a royalty due to the songwriters & publishers of a composition every time a recording utilising the composition is reproduced. So every time a sound recording is duplicated as a physical product or download or reproduced as a stream, the royalty due to the composition elements of the recording is typically referred to as the Mechanical. In many cases, mechanical royalty accounting is handled by mechanical collection societies, but in some cases it may be the label who is liable for the mechanical royalty accounting.
There are two sides to mechanicals in Curve:
- Reporting amounts due to publishers &/or collection societies
- Deducting the due royalty from the sales due to the artists
REPORTING MECHANICALS TO PUBLISHERS & SOCIETIES
Step 1: Create Mechanical Contracts
The first step is to create a mechanical contract for each Publisher or Society you need to report to. To get started, go to the Mechanicals page under the Contracts directory.
When you create a new Mechanical Contract, you need to complete an overview page similar to a regular Contract page. However, there are two new fields:
Currency – Select which currency to account in. For example if you use the Stat Rate to calculate US Download Mechanicals, you need to set the currency as USD. If you calculate the Mechanical based on a percentage of PPD, a percentage of Net Receipts or a custom Unit Rate, use your base currency.
License No – Map the Mechanical Contract to a specific license number for future reference. It is possible to map multiple track specific License Numbers for the same Mechanical Contract on the Track level.
The terms on a mechanical contract work like those on a standard contract. The top row specifies the conditions under which to report a mechanical royalty. You can manage the available values for the first row via the Settings Area. The second row sets the calculation to run when the above conditions are met & these options are:
Basis – What type of value is to be deducted? Select either the Stat Rate, a custom Unit Rate, a percentage of the PPD or a percentage of Net Receipts. When Stat Rate is selected, you will also need to choose between the US or CA Stat Rate.
Rate % – What rate to account for? If set at 100, it will account for 100% of the Basis selected. If set at 75, it will basically apply a 25% discount.
Reserve % – Do you need to hold a reserve against this mechanical deduction? If so, make sure to set a Reserve release schedule as you would with a normal artist contract.
The below example specifies a US Stat Rate to be reported for every Download in the United States. NB. for this contract the currency would need to be USD.
The next example specifies 8.5% of the PPD to be accounted to the Publisher/Collection Society for every physical copy sold. NB. for this contract, the currency would need to match the home currency, since your PPD would be set in your home currency.
Once you have created a Mechanical Contract it needs linking to catalogue items. This is done via the Mechanicals tab on relevant Tracks &/or Releases in your Catalogue area.
Step 2: Add Mechanical Contracts to Tracks and Releases
The second step is to define with each Track and Release if a mechanical royalty needs to be accounted for, and to which Mechanical Contract this royalty should be accounted to.
1. Mark which Tracks need a mechanical royalty to be accounted for
When looking to account a mechanical royalty for a set of Tracks, make sure they have the Report Mechanicals feature enabled. You can do so via the Mechanicals tab of each respective Track, or in bulk via the Track Separated template.
2. Mechanical Basis is the Stat Rate? Make sure the Stat Rate is specified on your Track
In the United States, the Statutory Rate (Stat Rate) is set by the Copyright Royalty Tribunal & specifies the Mechanical royalty due when a composition is reproduced. The value of the Stat Rate is dependent on the length of a track. The current US rate for tracks under 5 minutes is 9.1¢, for tracks running over 5 minutes a calculation of 1.75¢ per minute is used. For the sale of a bundle of tracks (ie. a download album or a CD) the amount due is a sum of the rate due for each track. In Canada, the Stat Rate is set by CMRRA & is set at 8.1¢ per song, per copy made, for a song of 5 minutes or less. Each additional minute or part thereof is an extra 1.62¢.
The length of a track is required to calculate mechanicals based on the US or CA Stat Rate. Enter the run time of a track in total seconds in the Duration (In Seconds) field in the Overview tab of the tracks. When a length is entered the Statutory Rate field on the Mechanicals tab will be automatically populated with the correct US Stat Rate & CA Stat Rate value based on this information.
When the mechanical royalty terms of your Mechanical Contracts use the PPD, Net Receipts or a specific Unit Rate as a basis, there is no need for (though also no harm in) the Stat Rate to be completed.
3. Add Mechanical Contracts to your Tracks
Similarly to how you specify to which Artist Contract a royalty needs to be calculated to, for each Track you will need to tell Curve to which Mechanical Contract a mechanical royalty should be accounted to. This happens via the Mechanical tab of your Track also.
Composer – This is not mandatory to complete, but for you own reference you may wish to specify the Composer of the Work. If so you can create Composers via the Composer page under the Catalogue directory.
Publisher – Again, not a mandatory field, but you may wish to specify the Publisher of the Work. If so you can create Publishers via the Publisher page under the Catalogue directory.
Contract – Select the mechanical contract to report to for this track.
License No. – Enter a License Number for your reference.
Rate % – How much of the revenue generated by this track is the contract due to participate in? For example, if a composition is used in a medley only a portion of the mechanical may be due.
Share % – The share of the composition used that the contract represents.
In the below example two publishers are involved, one represents a 75% share of the composition & the other represents the remaining 25%.
In the below example Publisher A represents 100% of the composition, and is attached via two contracts to account for different uses of the track. This may be necessary when the different uses should be accounted to the publisher in a different currency:
You may be wondering why a Physical contract would be attached to a track…
1. Need a Track Cap per Release? Set it via the Mechanical Basis of your Release
In some circumstances, a label may negotiate a reduction of the mechanical due to a track when part of a bundle sale (included in an album or EP purchase for example). This is not unusual when a large number of tracks make up a bundle, such as when a track is licensed to a compilation. This reduction is typically expressed as a Track Cap on the number of tracks to count towards the bundle for the mechanical royalty to be distributed to publishers of all compositions used in the bundle.
Track Cap – Enter the maximum total number of tracks to be considered. Curve derives a multiplier using this value & the total number of Tracks on the Release. For example if a release has 30 tracks, each due a stat rate of $0.091, the total mechanical liability would be $2.73. But if the Track Cap is set at 10, Curve will apply a multiplier of 0.33 (10/30) to the mechanical rate for each track. The total mechanical due for this release now would be $0.91, to be split across the attached tracks.
2. Add Mechanical Contracts to your Releases
Contracts can be added manually as per the workflow with tracks. Alternatively the button “Load Mechanicals From Tracks” connects all Mechanical Contracts attached to Tracks that are linked to this Release on its Overview tab. So for this button to work, all applicable Tracks must be added to a Release & all applicable Mechanical Contracts connected to those Tracks.
As a default, the Track Cap specified in the Mechanical Basis will be applied to all Mechanical Contracts. But per Mechanical Contract attached to a Track, you can specify a Track Cap Override which will be applied for that Contract instead. Beware, when reloading mechanicals from Tracks, the Track Cap Override will be lost.
Mechanicals can be loaded from Tracks in bulk for multiple or all Releases in your catalogue using the Bulk Update tool on the Release page. Just select “Inherit Mechanicals”, and Curve will inherit the mechanicals for all Releases the Release page is filtered on. Beware, any Track Cap Overrides set for specific Tracks will be overwritten when using the Bulk Update function.
Step 3: Run a Mechanical Period
Once your Mechanical setup is complete, you can run a Period which will create a statement for your Mechanical Contracts. The process is entirely the same to creating a regular Artist Period, with the one exception that as a Period Type you will need to select Mechanical rather than Standard.
DEDUCTING MECHANICALS FROM YOUR ARTISTS
As you are reporting mechanical royalties to publishers & songwriters, it is possible to deduct these amounts from artists royalties. The mechanical deduction calculation runs separately from the mechanical reporting calculation. It does not depend on the terms you specified in the mechanical contract, but is solely calculated based on the Terms specified in the Mechanical Deductions area on an artist’s Contract.
1. Set Mechanical Deduction Terms in your Artist Contracts
These terms can be set in the Mechanical Deduction area in the Terms tab of your Artist Contracts. They work similarly to standard sales terms: top row specifies types of revenue to use for the lower row to calculate due royalties. The different values in the bottom row are:
Basis – The type of value to be deducted:
- Use Stat Rate when calculating a deduction for digital transactions. Choose between either the US or CA Stat Rate.
- Enter a Unit Rate in the subsequent field. This can be used for digital bundle sales or physical sales.
- PPD is typically used only in physical sales.
- Or use the net receipt value of a sale
Deduction Type – The two options are Pre-Calculation or Post-Calculation:
- Pre-Calculation deducts the value at the calculation input level, resulting in the mechanical cost being shared between artist & record label.
- Post-Calculation deducts the value at royalty level, thus the total cost of the mechanical is passed through to the artist.
Unit Rate – This field is only available when Unit Rate is selected as Basis.
Rate % – The rate at which to deduct the mechanical. 100 meaning 100% of the defined Basis to be deducted.
Reserve % – Define a share of the mechanical to be held in reserve. If a value is entered the subsequent deduction would be released as per the release schedule set in the Reserves tab. Leave this field blank if no reserve should be taken.
Currency – The currency used to deduct the mechanical. If the deduction is based on a Unit Rate, PPD or Net Receipts, this will probably be your base currency. If you are deducting the US Stat Rate, this needs to be set as USD. When running a period you will be asked to enter an exchange rate from USD to your base currency.
The following example dictates a mechanical royalty deduction for downloads in the United States, calculated as 100% of the stat rate in USD.
2. Mark for which Tracks (and Releases) a mechanical royalty needs to be deducted
Remember how a mechanical royalty was only accounted for Tracks with the Report Mechanicals feature enabled? The same counts for mechanical royalties to be deducted. A mechanical royalty will only be deducted for Tracks which have the Report Mechanicals feature enabled. You can do so per Track’s Mechanical tab, or in bulk via the Track Separated template. When updating the Report Mechanicals feature per Track, make sure you Load Mechanicals From Tracks within the respective Releases also.
3. Mechanical Basis is the Stat Rate? Make sure the Stat Rate is specified on your Track
As with the Mechanical reporting process, when you deduct mechanicals based on the US or CA Stat Rate, make sure this rate is on each of your Tracks for which a mechanical is to be deducted.