How to Manage Participation Rates in Tone

Participation rates allow you to control the exact percentage of a track’s total sales and costs that flow into a specific contract before that contract's standard sales rates or cost rates are applied.

By default, when you link a track to a contract, both the sales participation rate and cost participation rate are set to 100%. This article explains how to configure these rates and two common scenarios where you may need to adjust them.

🧠 Understanding Participation Rates vs. Contract Rates

It is important to remember that Participation Rates and Contract Rates are separate:

1. Participation Rate (Track-Level): Dictates how much of a track's gross sales or costs are allocated to the contract in the first place.
   1. Sales Participation Rate: Dictates how much of a track's gross sales are allocated to the contract in the first place.
   2. Cost Participation Rate: Dictates how much of a track's gross costs are allocated to the contract in the first place.
2. Contract Rate (Contract-Level): Dictates the actual royalty or recoupment percentage applied to the allocated amount.
   1. Sales Rate: The rate applied to participating sales. Rate conditions can be based on territory, distribution channel, configuration, etc.
   2. Cost Rate: The recoupment rate applied to participating costs. Rate conditions can be based on cost Type.

<aside> 💡

Release participation rates in Tone are automatically prorated based on track participation.

</aside>

Sales Participation Rates

Example 1:

A contract has a 50% sales rate. You link Track A and keep the default 100% sales participation rate.

1. 100% of Track A's gross sales are allocated to the contract.
2. The contract’s 50% sales rate is applied to that amount.
3. Result: The payee receives 50% of the total track sales.

Example 2:

A contract has a 50% sales rate. You link Track B and set up a 50% sales participation rate.

1. 50% of Track B’s gross sales are allocated to the contract.
2. The contract’s 50% sales rate is applied to that amount.
3. Result: The payee receives 25% of the total track sales (50% sales participation rate x 50% sales rate = 25% effective rate).

Cost Participation Rates

Example 1:

A contract has a 50% cost rate. You link Track A and keep the default 100% cost participation rate. When a cost is mapped to Track A:

1. 100% of Track A's gross costs are allocated to the contract.
2. The contract’s 50% cost rate is applied to that amount.
3. Result: The payee recoups 50% of the total track costs.

Example 2:

A contract has a 50% cost rate. You link Track B and set up a 50% cost participation rate. When a cost is mapped to Track B:

1. 50% of Track B’s gross costs are allocated to the contract.
2. The contract’s 50% cost rate is applied to that amount.
3. Result: The payee recoups 25% of the total track costs. (50% cost participation rate x 50% cost rate = 25% effective recoup rate).

⚙️ How to Configure Participation Rates

Participation rates are configured at the track-level within an individual contract.

In Use Track Links

If you wish to edit participation rates on a track that you’ve previously linked to this contract and saved, you can do this from the contract Details panel.