Using Escalations to Increase or Decrease Royalty Rates ✪
Escalations are used to change a royalty rate once a trigger has been met. This trigger could be a date, a volume or a value. In this article we will discuss how to set up such a trigger, and what are the available options.
Adjusting the Royalty Rate After a Certain Date in Time
Using Escalations, you can trigger Curve to pay an adjusted royalty rate if the royalty comes from a sale after or is reported after a set date. The escalation trigger Sale Date will look at the Sale Date of each individual royalty line. The escalation trigger Reporting Date will look at the End Date of the Period.
In the below example, we pay a royalty rate of 50% of Net Receipts for all Digital revenue. However, if the royalty line has a Sales Date set that falls after the 31st of December 2021, the royalty rate for Digital revenue is automatically increased to 60% of Net Receipts.
Adjusting the Royalty Rate After a Certain Amount or Unit Count
Also using Escalations, you can pay an adjusted rate once the Contract has reached a set Unit Count, Gross Amount or Net Amount. These three triggers can be interpreted as per below.
Units – The number of Units processed by the linked Term
Gross Amount – The calculation input processed by the linked Term, so the total revenue before a royalty rate or participation rate is applied.
Net Amount – The calculation output processed by the linked Term, so the royalty that is paid to your artist.
To use such an escalation trigger, you will need to (1) create your Escalation Tracker, (2) assign it to a Term and (3) set your escalated Rate.
1. Create the Escalation Tracker - To program an escalation point, a tracker must first be created in the Escalations tab. You can give the tracker a name for your reference. In case there has been any ongoing business for this Contract, you can set starting values for Units, Gross Amount & Net Amount. If this is a new relationship for your business these will likely be zero. Every time you run a statement, the total of this Tracker will automatically update.
Additionally, when using a Unit tracker, you have the option to assign weights to specific Unit counts. It is reasonable to assign a different weight to a Download vs a Premium Stream vs an Ad-Funded Stream for example.
2. Assign the Escalation Tracker to the Terms - In this step, you specify which royalties should count towards this Tracker. You may only want Digital sales to count towards your Tracker, for example. By adding the Tracker to a Term, only royalties processed by that particular Term will count towards your Tracker.
3. Set your Escalated Rate - In your final step; you will specify for which terms you want to pay an adjusted royalty rate, at which value you want the escalation to be triggered, and what is the adjusted royalty rate you eventually wish to pay.
In the below example, we (1) create our Digital tracker, and specify a starting point of 538 units. We additionally specify that 1000 streams count as one Unit. We then (2) assign this Digital tracker to our Digital term, so that all Units flowing through this term moving forward will count towards our tracker. And finally, (3) we specify that, once our tracker has reached a Unit count of 10,000 Units, we will pay a royalty rate of 60% for all Digital revenue.