The Digital Deals Comparison Calculator has been developed as part of the MMF’s Dissecting The Digital Dollar project alongside the ‘Deals Guide’, in order to make it easier to visualise the pros and cons of different label and distributor deal types.
By inputting the kind of deal you are signing up to, the investment a label partner will make, and the level of streams you are anticipating, you can see how subsequent streaming income will be shared between the label and the artist over the next five years. This is then counter-balanced with the list of services the label will provide.
In order to keep the Calculator as simple as possible to use, a number of assumptions have been made, about deal specifics, and streaming rates and royalties. Of course every deal is different, streaming rates are constantly evolving, and streaming royalties vary according to a number of factors. The Calculator is also specifically focused on streaming income, and does not include other revenue streams like physical, sync and PPL.
Therefore the Calculator is not intended as a financial planning tool, but to provide an easy way for artists and managers to compare the impact different deal decisions have on the way subsequent streaming income is shared.
Though you might want to read these instructions first. Or open the Calculator in another window, so you can follow the instructions as you go.
First of all you need to pick a deal type. There are ten deals types to select from, based on the ten deal types outlined in the ‘Deals Guide’.
We have pre-programmed the Calculator so that each deal type has a fixed royalty rate and list of services provided. The royalty rate is the percentage of streaming income that is paid to the artist. The list of services relates to the activities the label is contractually obliged to deliver.
You can see the pre-programmed royalty rates for each deal type in the table below. You can also see the royalty rate for the deal you have chosen in the box under Deal Specifics and the services offered will be displayed in pink on the right hand side of the screen.
Obviously, every deal is different, and within each deal type the actual royalty rates and list of services provided will usually be negotiable. If you have actual deals on the table, you should try and pick the deal type that most closely matches what you have agreed.
Now you need to tell us what commitments the label has made to the artist and predict the level of streams you will secure over the next five years.
ADVANCE + OTHER LABEL SPEND
First the label’s commitment. How much is the label committed to spend on the artist? This is the cash advance the label will pay the artist plus any other costs the label is obliged to cover, such as studio time, producer fees, artwork, videos, marketing, advertising and PR. Your deal may or may not put an actual financial value on this activity. If not, you’ll need to estimate the value of this work.
WHAT % OF ITS SPEND CAN THE LABEL RECOUP?
Of the money the label spends, what percentage can it recoup from the artist’s royalties? A label or distributor will usually be able to recoup any cash advance from the artist’s share of income before actually handing over any additional money. But the label partner may also be able to recoup some or all of its other costs as well. Of the label’s total spend, approximately what percentage is ‘recoupable’ in this way.
LEVEL OF ARTIST
Approximately how many streams do you think your artist will generate, across all the tracks covered by this deal, on the core streaming platforms each year over the next five years? We are interested in streams on services like Spotify, Apple Music, Deezer and Tidal, not YouTube and SoundCloud.
To help, we have surveyed a number of artists operating at differing levels to find out approximately how many streams they generate across their catalogues. Therefore you can just pick an appropriate level of artist from our list and use our pre-programmed estimated streaming figures.
Or if you have an idea of how many streams you might actually achieve, check the pre-programmed streaming figures for each level of artist in the table below, and pick the one that is closest to your anticipated number.
Depending on the level of marketing you can afford to do, your streaming numbers may peak quickly and then subsequently slip to a lower constant rate, or they may slowly build over time and peak after a few years.
Based on your marketing plans, predict when you think your streaming levels are likely to peak. Or, if the deal covers catalogue material, pick ‘catalogue’.
Will the label control your artist’s music for the next five years on the terms agreed in the original deal, or will things change after a number of years, or when a certain level of income is achieved?
If the deal is fixed for the next five years whatever happens, you can leave this section blank. But if your royalty rate changes after a certain time or level of income, add this information into the Rights Reversion section of the Calculator
If at this point, the rights revert entirely to the artist, you could put a new royalty rate of 100%, as all subsequent income technically belongs to the artist. Though you’d likely still need a distributor to keep your content online, which would presumably charge a fee or a commission, so you might want to acknowledge this and pick an appropriate new royalty rate.
Based on all this information, two graphs will appear at the bottom of the Calculator. The first shows expected income levels each month over the next five years. The second shows total profit achieved by both the label and the artist from all the streaming income generated by tracks covered by the deal over the next five years. Additionally, the services your business partner is providing will be displayed in pink at the top right of the screen.
Remember, a number of assumptions have been made to keep this Calculator simple. It is intended to give you a basic visualisation of how different deals compare, in terms of how income is shared and services provided. We may develop a more sophisticated version of the Calculator in the future, so do let us know if you have any feedback, or opinions on what extra flexibility or functionality we should add.
The Digital Deals Comparison Calculator was designed by Chris Carey at Media Insight Consulting. It has been built on broad assumptions to illustrate the difference between deal types. If you are looking for more bespoke modelling of label and distribution deals, Media Insight Consulting can provide support of this kind on a contract basis. His email is email@example.com
Assumed royalty rates for each deal type
01: DIY Distributor (Fee Based) – assumed 100% royalty
02: DIY Distributor (Commission Based) – assumed 90% royalty
03: DIY Distributor (With Advance) – assumed 85% royalty
04: Distributor Deal – assumed 80% royalty
05: Distributor Deal (With Marketing) – assumed 80% royalty
06: Distributor Deal (With Label Services) – assumed 70% royalty
07: Distribution Deal With Label – assumed 60% royalty
08: Indie Label Deal (Profit Share) – assumed 50% royalty
09: Indie Label Deal (Royalty) – assumed 20% royalty
10: Major Label Deal (Royalty) – assumed 17% royalty
Number of yearly streams for each artist level
1. Starting To Get Noticed – c.150,000 per year
2. Grassroots Artist – c.500,000 per year
3. Breaking Through – c.1,000,000 per year
4. Breakthrough Artist – c.2,500,000 per year
5. Mid-Level UK Artist – c.10,000,000 per year
6. Established UK Artist – c.25,000,000 per year
7. Mid-Level Global Artist – c.50,000,000 per year
8. UK Superstar – c.100,000,000 per year
9. Established Global Artist – c.500,000,000 per year
10. Global Superstar – c.1,000,000,000 per year