Once upon a time there was a tiny royalty, floating around in the millions of lines of data. From DSP to society to publisher, our little royalty has already gone a long way. There is however one final step, and that is that of the publisher reporting these royalties on to the songwriter. In the previous article we looked at the different parts of a publishing agreement between publisher and songwriter. An important aspect were the royalty terms which outline the royalty calculation that will be applied before the writer gets paid. In this article we will look at an example of such a calculation.

Publisher to writer: the dataset

Let’s say the below set of royalty rates relates to our publisher Royalties 101 Publishing Group and our writer Anne Hathacoin.

Let’s say our agreement with Anne Hathacoin covers three works. And let’s say for each of these three works, somehow, our publisher has collected the exact below amounts.

• £1000 performance income from the US
• £1000 mechanical income from the UK
• £15,000 synch income from the UK (non-writer procured)

Let’s also say that Royalties 101 Publishing Group is a PRS member and is sub-published for all non-UK territories. Their sub-publisher takes a 15% commission. In this case, we’ll need to take a closer look at the revenue coming from outside of the UK. Since the sub-publisher takes a 15% commission, the actual money paid from the PRO to the sub-publisher is £1,000 / 85 x 100 = £1,176.47. This is the ‘at source’ amount that will be used for the royalty calculations.

Let’s see how the money is divided and paid out. The first thing we need to do is calculate our writer’s participation rates. This is the share of income they are entitled to, based on the total share the publisher has received. After we have done that, we will apply the correct royalty rate to their share. 

Example: Work 1

Writer 1: Anne Hathacoin - 100% - published by Royalties 101 Publishing Group

The participation rate for this writer is 100%: she owns the full share in the work and is the only controlled writer. Now we know the participation share, let’s reference the royalty rate table to find the correct royalty rates for each of our payment categories:

• Performance: £1,176.47 at source x 70% royalty rate = £823.53
• Mechanical: £1000 net revenue x 80% royalty rate = £800
• Synch: £15,000 net revenue x 50% royalty rate = £7,500

So we will pay Anne Hathacoin a total of £9,123.53 for this work.

Example: Work 2

Writer 1: Anne Hathacoin - 50% - published by Royalties 101 Publishing Group
Writer 2: Billy Bank - 50% published by Royalties 101 Publishing Group

This work has two writers who each wrote 50% of the work, and are both controlled by Royalties 101 Publishing Group. This means that all income received for this work will be equally divided amongst both writers. Our calculations for our writer will look like this:

• Performance: £1,176.47 at source x 50% writer participation rate x 70% royalty rate =£411.76
• Mechanical: £1000 net revenue x 50% writer participation rate x 80% royalty rate = £400
• Synch: £15,000 net revenue x 50% writer participation rate x 50% royalty rate = £3,750

So we will pay Anne Hathacoin a total of £4,561.76 for this work. The royalty paid to Billy Bank will depend on his 50% participation and the royalty rates specified in his agreement.

Example: Work 3

Writer 1: Anne Hathacoin - 50% - published by Royalties 101 Publishing Group
‍Writer 2: Billy Bank - 30% - published by Royalties 101 Publishing Group
‍Writer 3: Lisa Dough - 20% - published by Moneymaker Publishing Ltd

As you can see, this work has both controlled and uncontrolled writers. This means we need to calculate the participation share for the controlled writers. After all, Royalties 101 Publishing Group has only received income for the writers they publish. This means that 100% of the income received by Curve is for the 80% of the song that’s written by our controlled writers. In other words, we will need to proportion their shares to 100%.

Anne Hathacoin: 50 (split in the work) / 80 (total controlled share of the work) x 100 = 62.5%

Billy Bank: 30 (split in the work) / 80 (total controlled share of the work) x 100 = 37.5%

Now that we have Anne Hathacoin’s participation in the income, we can calculate his royalty.

• Performance: £1,176.47 at source x 62.5% writer participation rate x 70% royalty rate = £514.71
• Mechanical: £1000 net revenue x 62.5% writer participation rate x 80% royalty rate = £500
• Synch: £15,000 net revenue x 62.5% writer participation rate x 50% royalty rate = £4,687.5

So we will pay Anne Hathacoin a total of £5,702.21 for this work.

For the three works together, it means Anne Hathacoin is due royalties with a total value of 19,387.50.

Publisher to writer: sending statements

Once you have made your royalty calculations, it is important to present this information to your writers in a transparent way. The industry standard is to send a statement to your songwriters in a PDF format which summarises the total royalties that have been earned during the royalty period. Additionally an Excel statement will be provided which details where the revenue comes from and which royalty calculations have been applied. Some royalty accounting tools will also provide you with an online artist portal which holds these statements and may provide additional functionality such as an interactive analytics tool.

Below is an example of a PDF statement. This statement notifies the songwriter of an Opening Balance (Is there an advance still to be recouped? Is there an unpaid balance remaining from the last royalty statement?); any transactions such as payments, advances or adjustments that have occurred during the royalty period; and a final closing balance which totals the amount that is now payable to the writer.

This PDF statement may also hold a quick summary of the top works, territories and sources.

An Excel statement should be provided which holds all the important data points of the revenue such as the Usage Date, Territory, Source (and Sub Source), Rights Type, Work, Units and Net Amount. It should also provide all the variables that were used in the royalty calculation such as the Participation Rates, Royalty Rates and any potential Deductions that occurred. This sheet allows the writer to fully understand where their revenue comes from and to audit the royalty calculations.

Of course not everyone knows how to add a pivot table in Excel to analyse data. Therefore, an interactive analytics portal can be helpful in assisting your songwriter in understanding their data.

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