The Limitations of Classic Profit Share Deals

Some legacy clients still have access to the Classic Profit Share deal type, which has been replaced by the more versatile Flexible Profit Share option. Classic Profit Share deals have as a characteristic that negative balances are held on the Contract as they are, and only once the balance is positive, a profit share % is applied. This means that the negative balance of a Classic Profit Share is held at the full loss, whereas a positive balance refers to the Artist share of the profit only. For comparison, in a Flexible Profit Share deal, the balance is always (whether negative or positive) held at the artist share only.

This approach limits adjustments and cross-contract functionality, making it suitable only for straightforward setups. We therefore advise to always use either the Royalty or Flexible Profit Share contract type. If you have access to the Classic option, it should only be used when you have a simple and classic profit share setup, where you take the sum of all sales and costs, and then apply a profit share percentage, without any further exceptions.

Classic Profit Share Limitations

• When a Payment transaction is created on a Classic Profit Share Contract, it should only ever bring the balance down from a positive balance to zero. When an Advance transaction is created on a Classic Profit Share Contract, it should only ever bring the balance down from zero to a negative balance. If a Payment transaction would bring a balance below zero, or an Advance transaction is applied to a positive balance, then this will cause a disconnect in how the balance is attributed to artist and label.
• When a transaction is added to a Classic Profit share Contract with negative balance (either a manually added transaction or one created through a Cross-Contract), a series of adjustments is needed to ensure that the transaction accurately reflects its impact on the artist share of the profit. In this scenario, Curve makes two adjustments: A Negative Balance Adjustment that removes that deduction from the main balance (recoupable from both Label and Artist), and a Transaction to Advance (recouped from the Artist share) that applies that amount to the advance balance so that it is only recouped from the Payee's share of the earnings. 
• It is not possible to use a Cross-Contract to transfer a negative balance from a Classic Profit Share contract to another Contract. If you would, you would transfer this balance before the Profit Share % is applied. The Cross Contract option to "Always Transfer Balance - Add To" on a Classic Profit Share is not available. The balance on a Classic Profit Share deal should only be transferred when the Balance is Positive.
• Last but not least, the Statement of Account or the Transactions tab on Classic Profit Share deals has limitations; a negative profit balance and advances are thrown together, which doesn't really give the full picture since part of this negative balance would be entirely attributable to the artist, while another part is attributable to both the artist and label. To fully understand the current status of your deal, we'd advice to look at the PDF Statement, which does keep these separate.