The concept of “Mid-Price” / “Budget Price” harks back to a time when the music industry primarily relied on physical formats for sales, and retail price reductions needed to be factored into royalty calculations, typically based on PPDs (Published Price to Distributors), to avoid high royalty payments on low sales revenues. The idea was that royalties would be reduced with deductions if the actual achieved prices were less than a third, a half, or a quarter of the listed PPDs. Although somewhat outdated, this concept still finds application in retail today and in legacy contracts.
In DETAILS, we offer a solution that follows this logic in royalty calculations based on a ratio between a fixed Product PPD, set in the product itself, and imported prices obtained through sales imports. Users can establish calculation conditions where a certain deduction or royalty rate applies if the ratio between the fixed product PPD and achieved prices falls below a certain threshold.
The deduction rules can be combined with other royalty conditions.
Here are a few examples:
Base :
The fixed PPD of a product must be configured in the product details in CATALOG / PRODUCTS
Example 1:
The regular FULL PRICE condition is defined by default in the physical royalty settings.
The “Mid Price” and “Budget Price” reductions can be defined a “Contract Deductions”, appearing in the royalty reporting as Deduction 4 or 5.
A reduction of 25% if the applied if prices fall below 75% of the PPD for MID PRICE
A eduction of 50% if the applied if prices fall below 50% of the PPD for BUDGET PRICE.
Contract Deduction:
(1) Budget Price: 50.00% reduction when Income/PPD Ratio < 50.00
(2) Mid Price: 25.00% reduction when Income/PPD Ratio < 75.00
Note : It is important that the rule for the budget price is placed earlier in the sequence than the rule for the mid price, so that it applies first when prices are as low.
Example 2 (Setup within physical product rules):
Setting up 3 rules for BUDGET PRICE, MID PRICE, and FULL PRICE (general royalty rate):
(1) Deduction of 50% is applied if prices fall below 50% of the PPD.
(2) Deduction of 33% is applied if prices fall below 75% of the PPD.
(3) No deduction if prices remain up to 75% of the PPD.
