The Hierarchy of Sales Terms in a Contract

When configuring contracts in Curve, it's necessary to add sales terms which will specify the royalty rate which is to be applied to the different types of revenue. This article explains how Curve decides which term and its royalty rate will be applied to a sales line. Particularly when there are several terms on the Contract which are a match, it has a logic to decide which royalty rate will be applied. Understanding this logic is key to ensuring the correct rate is applied to each revenue line during distribution.

If Multiple Terms Match the Revenue, Which Term Will Be Applied?

To any given sales line, the contract will always apply the Sales term that is most specific. The order in which the terms are created on the Contract does not make a difference. The term that is deemed most specific is decided by three rules.

Which term has at least one condition that is highest up in the hierarchy. The hierarchy goes from left to right, so from Cat Type > Cat Group > Territory > Channel > Configuration > Price Category > Source.
If two terms both have a condition that is equally high up in the hierarchy, which of these is a direct condition rather than a Contract Term Group? A Configuration condition for Premium Stream will be deemed more specific than a configuration condition for a Streaming Group. Similarly, a Territory condition for the US will be deemed more specific than a Territory condition for a Territory Group US & CA for example.
If two terms both have a condition that is equally high up in the hierarchy, and they both are direct conditions or both are group conditions, then Curve will look at the first following condition to verify which Term is deemed most specific.

As an example, below, we are displaying six terms which are ordered from more specific to less specific. The first term is most specific, because it has a Cat Type condition. The 2nd and 3rd term both have a Territory condition, but the 2nd term is deemed more specific because it is a specific Territory rather than a Territory Group. The 4th and 5th term both have a Channel condition, but the 4th term is deemed more specific because it also has a Configuration condition. Finally, our 6th term is least specific because it does not have any conditions set.

Let's have a look at a real-life scenario. The following example contains a common pitfall. 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.