Royalty & Deal Math Examples
This document provides worked equations, configurable examples, and step-by-step calculation traces for Music Business Hub tools. The examples are educational; rates, contract terms, and jurisdiction-specific rules should be checked against current authorities before use.
Trace one traditional deal line by line
This inspector uses the same calculation engine as the deal simulator. Change an assumption and every line, balance, and reconciliation updates together.
10,000,000 streams × $0.0038 = $38,000.00$38,000.00 × 18% = $6,840.00$100,000.00 advance + $50,000.00 costs = $150,000.00min($6,840.00, $150,000.00) = $6,840.00 recoupedArtist cash now = $0.00Unrecouped balance = $143,160.00$0.00 artist current cash + $38,000.00 company share/recovery = $38,000.00Statutory Authorities & Governing Bodies
| Domain | Statutory Citation / Rule | Governing Authority | Configured Example / Standard |
|---|---|---|---|
| Physical / PDD Mechanicals | 37 C.F.R. § 385.11 | Copyright Royalty Board (CRB) | $0.1310 / work (or $0.0252 / min) |
| Physical Controlled-Comp Example | Negotiated clause; 17 U.S.C. § 115(c)(2)(A) for digital limits | Contract terms / Copyright Act | $0.09825 / controlled song (illustrative 75%) |
| Interactive Streaming Blanket | 37 C.F.R. § 385.21 / MMA | The MLC (P.L. 115-264) | 15.3% in 2026 (15.35% in 2027) |
| Eligible Statutory Noninteractive Use | 17 U.S.C. § 114(g)(2) | SoundExchange | 50% Label / 45% Artist / 5% AFM-SAG |
| PRO Accounting Convention | Current society distribution rules | ASCAP / BMI and applicable society | Often 50% writer-side / 50% publisher-side |
1. Statutory Mechanical Royalty Equations
Statutory mechanical royalties are compulsory royalties paid by record labels and distributors to song copyright owners (songwriters and publishers) for physical vinyl, CDs, and permanent digital downloads under 17 U.S.C. § 115.
In this configured example, $0.1310 is used for songs up to 5 minutes (300 seconds), and $0.0252 per minute is used under the Long Song Rule for songs exceeding 5 minutes. Confirm the current CRB schedule before relying on these inputs.
Some recording agreements use a percentage cap for artist-controlled songs on physical copies. This example models a 75% clause and a difference of $0.03275 per physical unit. It is not applied to streaming, and post-June 22, 1995 artist contracts generally cannot replace CRB digital-delivery rates with a contrary reduced rate, subject to the exceptions in 17 U.S.C. § 115(c)(2)(A).
2. Record Deal Recoupment & Royalty Math
The simulator does not force every offer through one royalty formula. It first selects the matching economic model, then keeps generated revenue, cash paid now, and any advance paid earlier separate. The contract controls which revenue base, deductions, costs, and recoupment rules actually apply.
Artist cash paid now equals artist royalties earned minus current recoupment. The remaining royalty-account balance cannot fall below zero.
In this model, the defined cost pool is recovered before—not after—the remaining profit is divided.
The stated service fee is deducted once. Any advance or funded support must be entered separately instead of hiding a second fee inside the artist share.
Publishing percentages apply to composition income, not the master-receipts estimate.
This is one commission on composition collections. It is not also modeled as a reduced ownership share.
The tool adds this separate ancillary split to the traditional master model. It does not assume ancillary income recoups a master account unless the user confirms that rule from the contract.
For every model, Artist current cash + partner share + fees + cost recovery = generated revenue. The advance is displayed on a separate cash timeline because it was paid earlier and is not newly generated revenue.
3. Publishing & Co-Publishing Split Equations
U.S. performance-royalty accounting commonly describes a writer's share and a publisher's share as equal halves. That collection convention is not the same thing as copyright ownership under 17 U.S.C. § 201(a), and mechanical, synchronization, and administration statements may present income differently.
In this simplified example, the writer keeps the full writer-side accounting share (50%) plus half of the publisher-side share (25%). The co-publisher receives the other 25%.
In this simplified example, the songwriter retains ownership and pays a 15% administration commission on covered gross collections.
4. SoundExchange Statutory Distribution
For eligible U.S. noninteractive digital performances made under the statutory license, the designated collective distributes sound-recording royalties under 17 U.S.C. § 114(g)(2). A platform name alone is not enough to classify a use because a company may operate more than one type of offering.
5. Worked Example: 10,000,000 Streams
Below is the step-by-step trace for the simulator's default traditional-record-deal scenario. The $0.0038 master rate is a user-editable planning assumption, not a promised DSP rate:
Deal math in context
Compare the contract structures that determine which assumptions belong in each calculation.