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Qlero calculates a royalty for every sales file row and every contract that participates in the row’s track or release. This article follows one row through that calculation so you can explain why a contract earned the amount it did.
Participation rate overrides, deduction terms, escalations, and the PPD royalty base are available on Pro and Enterprise plans.

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Royalty base

The royalty base is the part of the sale the royalty rate applies to. Every rate in a sales term names its base next to the percentage, and the base matters as much as the percentage: 25% of Gross Receipts and 25% of Net Receipts pay different royalties whenever the two imported amounts differ. Most deals use Gross Receipts or Net Receipts. The price-based bases suit deals priced per unit, such as physical sales with a fixed dealer price. A sales term can use a different base and rate in each branch. Say Nora Lane’s contract pays:
  • When Territory = Worldwide, AND Sale Type = Stream, THEN 20% of Net Receipts
  • When Territory = Germany, AND Sale Type = Stream, THEN 25% of Gross Receipts
A stream in Japan pays 20% of the row’s net amount. A stream in Germany pays 25% of the row’s gross amount, because the closer territory match wins and it brings its own base along. How the terms hierarchy works explains which branch wins when several match.

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The calculation in one line

Royalty = royalty base x participation share x adjusted royalty rate The adjusted royalty rate starts as the rate on the matching branch. A matching deduction changes it first, then any escalation whose threshold has already been reached. The rate can’t drop below 0%. For each contract on the row, Qlero:
  1. Finds the contract’s participation share on the matched track or release.
  2. Selects the matching sales-term branch, which names the rate and the royalty base.
  3. Applies a matching deduction to the rate.
  4. Applies any active escalation.
  5. Multiplies the base by the participation share and the adjusted rate.
Qlero prices each row on its own and then adds the results into the contract’s period total. When a row is in another currency, Qlero converts its amounts to the payee’s reporting currency before it picks the base. If the exchange rate it needs is missing, that contract’s share of the row goes to suspense with the reason Missing Contract Exchange Rate instead of producing a royalty.

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Participation share

The share comes from the Sales section of the Participation Rates tab on the track or release matched to the row. A contract at 100% receives the whole base; a contract at 80% receives 80% of it before its rate applies. The shares on a track or release don’t have to add up to 100%: each contract is calculated on its own, so a producer deal at 20% on top of an artist deal at 100% is allowed, and a section totalling less than 100% leaves the rest outside any contract. When a track or release has a participation override that matches the row’s sale type, source, or store, the override rates replace the standard Sales rates for that row. Assigning contracts to tracks and releases explains how to set these shares.

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Deductions and escalations

Deduction. A contract’s deduction term adjusts the selected rate, and the two types work differently:
  • An Absolute deduction subtracts percentage points. A 25% rate minus 2 points becomes 23%.
  • A Relative deduction multiplies the rate by the percentage you entered. A 25% rate with a 90% relative deduction becomes 22.5%.
A deduction term whose branches match nothing in the row leaves the rate unchanged. Escalation. An escalation changes the post-deduction rate once the contract’s totals cross a threshold you set, such as a number of units. Qlero checks the totals accumulated before the row, so the row that crosses the threshold still pays the earlier rate in full.

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Worked example

Nora Lane’s track Northbound has three Spotify streaming rows for Germany in this period’s sales file. Their gross receipts add up to EUR 1,000: Nora Lane’s contract is the only contract on the track, with a Sales participation of 100%. The matching branch of its sales term is the German one above: 25% of Gross Receipts.

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Without a deduction

The contract has no deduction term and no escalation, so the adjusted rate stays at 25%. Each row is priced on its own, and the royalties add up the same way the gross receipts do:

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With a deduction

Now the contract also has a deduction term with a 90% relative deduction that matches these rows. The deduction adjusts the rate before anything is multiplied: 25% x 90% = 22.5% adjusted royalty rate The same three rows then pay: EUR 1,000 x 100% x 22.5% = EUR 225

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With two contracts on the track

Now the track’s Sales participation is split: Nora Lane’s contract takes 80% and Sam Carter’s producer contract takes 20%. Sam Carter’s contract has its own sales term, 5% of Gross Receipts, and no deduction term. Every contract gets its own calculation from the same EUR 1,000: Nora Lane’s royalty drops from EUR 225 to EUR 180 because her share dropped, not because a producer was added. Each contract’s royalty depends only on its own share and its own terms, never on what the other contracts on the track receive. The shares here add up to 100%, but Qlero doesn’t require that.

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From royalty to statement balance

The EUR 225 is the royalty these rows produce for this contract. It isn’t the contract’s closing balance or the amount paid to the payee. When you calculate a period, Qlero adds every row royalty for the contract into one Royalty transaction on its statement. Costs, reserves, opening balances, advances, and manual adjustments appear as their own transactions, and the resulting balance then carries forward or rolls up to the account and payee. See How to use contracts, accounts and payees for that later flow.

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