Negative Balance Transfer Adjustment transactions in a Classic Profit Share

Overview

Some long-time users of Curve still use the Classic Profit Share deal type, although we now recommend using the more modern and flexible Flexible Profit Share deal instead. This article explains a specific situation that can occur with Classic Profit Share deals: when a Negative Balance Transfer Adjustment appears on your statement.

In brief, these transactions may appear on the Contract when a positive transaction is added to a Classic Profit Share with a negative balance. There is also another type of adjustment, the Transaction To Advance, which may appear on the Contract when a negative transaction is added to a Classic Profit Share with a negative balance.

For context, the key differences between a Classic and Flexible Profit Share are

• Classic Profit Share: Balances are held in full loss. This means that if a Contract has a negative balance, that full loss is shown before any profit share percentage is applied. Only once the balance becomes positive is the profit split between the label and artist.
• Flexible Profit Share: Balances always reflect only the artist share, whether positive or negative. This makes statements simpler and avoids the confusion described below.

The Negative Balance Transfer Adjustment

In Classic Profit Share deals, this “full loss” approach can lead to unexpected situations, especially when adding new positive transactions (which are entered at the artist share only) to a Contract that has a negative balance (which is stored as a full loss).

This mismatch means we need to make an adjustment to ensure that everything adds up correctly in the artist's share. That’s where the Negative Balance Transfer Adjustment comes in. We explain this through an example scenario below.

Example Scenario

Let’s walk through a simple example to see how this works.

Contract setup:

• Deal type: Classic Profit Share
• Profit Share %: 50% to the artist
• Opening Balance: -1,000 (this is a full loss shared by both label and artist)
• New Transaction: +100 (entered at the artist share only)

The artist’s position in this example is thus -400 (because it holds a position in half the negative opening balance, and entirely in the transaction).

However, if Curve were to simply add the +100 to the opening balance of -1,000, this would result in a balance of -900 and an artist share of -450, which is incorrect.

To fix this, Curve automatically adds a Negative Balance Transfer Adjustment. In this example, it's +100, which brings the total up to the full label-and-artist value that corresponds to the original artist-share transaction.

Now the full list of transactions looks like this:

Let’s check the math:

• At -800 full balance, the artist’s share is -400 (50% of -800)
• This matches the expected artist position: -500 (opening) + 100 (transaction) = -400

Why Use Flexible Profit Share Instead?

Situations like this are exactly why we recommend using Flexible Profit Share deals going forward. With Flexible Profit Share:

• Balances are always tracked at the artist share
• There’s no need for conversion or special adjustments
• Statements are easier to read and understand
• It’s the best choice for Contracts that include cross-contract transfers

If you have existing contracts with the Classic Profit Share deal type and would like to migrate to the Flexible type, please note that there are a few considerations when doing so: Considerations around changing a Classic Profit Share deal to a Flexible Profit Share deal