Deducting Mechanicals From Your Artists ✪

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 mechanical royalties to publishers &/or collection societies
• Deducting the mechanical royalty from artist's royalty

In this article, we will display how to deduct mechanical royalties from your artists. 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 the Mechanical Deduction Term in Your Artist's Contract

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. Via the top row you specify under which conditions you wish to deduct a mechanical royalty. Via the bottom row you specify which mechanical royalty amount to deduct in these circumstances. The different values in the bottom row are:

Basis – The type of value to be deducted:

• Stat Rate - The mechanical amount is based on the Statutory Rate, a unit rate established by the US Copyright Royalty Tribunal or the CMRRA, which differs based on the length of the Track. Depending on your set up, Curve will apply the relevant stat rate based on the mechanical basis (Sale Date or Custom), the Sale Date and the duration of the track. We will automatically calculate the Stat Rate based on the Duration of the Track. If no Duration is provided, we will by default assign the minimum rate. The Mechanical Basis (Sale Date or Custom) of each Track can be configured on the Track's Mechanicals tab. Any Track Caps set on Release level will be taken into consideration when calculating the mechanical deduction based on a (Minimum) Stat Rate.

• Min Stat Rate - A Min Stat Rate automatically applies the set Minimum Stat Rate, disregarding the length of the Track. The minimum rate is by default set as per the guidelines of the Copyright Royalty Tribunal and the CMRRA and can be customised via the Mechanicals tab in your General Settings. The correct Min Stat Rate will automatically be applied based on the Sale Date of the sale. Also any Track Caps set on Release level will be taken into consideration when calculating the mechanical deduction based on a (Minimum) Stat Rate.

  
  

  Please note: if you're using the Stat Rate or Min Stat Rate as a basis, you will need to configure these by following the steps below

  
  
• Unit Rate - This option allows you to set a custom mechanical amount that will be applied per unit. Track Caps will not be considered.
• PPD - The mechanical amount will be set to a percentage of the Main Dealer Price. When selecting this option, please make sure your Releases have a Main Dealer Price. This option should be used for Release sales only, since Tracks can not have a Main Dealer Price. Track Caps will not be considered.
• Net Receipts - The mechanical amount will be set to a percentage of the Net Receipts. Track Caps will not be considered.

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.

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.

Please note: if mechanical licenses are assigned to your Tracks, and a discount is applied to the Mechanical Contracts via the Rate %, then this discount will also be applied to the mechanical deductions. Essentially, if a discounted rate is reported to the publisher, also a discounted rate would be deducted from the artist. If the Rate % is 90%, only 90% of the Stat or Custom Rate will be used as a calculation input. If multiple Mechanical Contracts with different Rate % are linked against the Track, we'll use the average Rate % to be applied in the Mechanical Deductions.

If You Make Use of Stat Rates: Configuring your Statutory Rate in your Settings

The Statutory Rate is a unit rate established by the US Copyright Royalty Tribunal or the CMRRA, which differs based on the length of the Track. The way statutory rates are handled changed from January 1st 2023: a different statutory rate will need to be applied for sales prior to 2023 and sales from 2023 onwards. If you're using the Statutory Rate as a calculation basis for your mechanicals, you will need to follow the below steps.

Our approach to mechanical calculations based on stat rates accommodates both the old and new rates. We allow two different calculation bases: Sale Date or Custom.

• When Sale Date is selected, Curve will look at the Sale Date on a royalty to decide which rate should be applied. Any royalties with a Sale Date from January 1st 2023 onwards that are set up to be calculated based on a Statutory Rate will have the new rates applied. Any royalties with a prior date that are calculated based on a Statutory Rate will have the old rates applied. The Sale Date is the most commonly used mechanical basis for calculations.
• If you have set up a Custom Rate, this rate will be applied regardless of the Sale Date.

To make sure the correct rates are applied, you will need to set up the mimimum amounts and per minute rates on the Mechanicals tab in your General Settings. You can enter stat rates for different years: from 2023 onwards you will need to use the new stat rates.

2

Mark for Which Tracks (& Releases) a Mechanical Royalty Needs to Be Deducted and update the Mechanical Basis

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.

If you're using the Statutory Rate or Min Stat Rate to calculate your Mechanicals, you will also need to specify on which basis the mechanicals for a Track need to be calculated. These can be calculated based on Sale Date, or based on a Custom rate. You can update the Mechanical setting on your Tracks' Mechanicals tab:

Tracks can be updated in bulk using a Track template import.

Coming up in Mechanicals

Please keep your eyes peeled for further updates coming to our mechanical reporting functionality; such as

• Customising the Stat Rate based on the Release Date