What are Deduction Rules?

"Deduction Rules" are contractual mechanisms applied within "Contracts Money Out" that modify standard Royalty Rates under specific, predefined conditions.

They allow the Organization to adjust royalty outcomes dynamically, based on contextual criteria such as territory, retailer, sale type, provider, or period, without altering the base Royalty Splits or Rates defined in the contract.

A Deduction Rule does not replace a Royalty Rate. It modulates it.

Deduction Rules are typically used to model clauses such as:

territorial exclusions or reductions
retailer specific conditions
promotional or discounted sales
temporary contractual adjustments
exception based royalty reductions or increases

An unlimited number of Deduction Rules can be defined per "Contract Money Out".

However, special care must be taken when stacking multiple rules, as overlapping conditions may result in one Deduction Rule partially or fully cancelling the effect of another.

Where Deduction Rules apply

Deduction Rules apply exclusively to "Contracts Money Out".

They are evaluated:

during royalty calculation
after Royalty Splits are identified
after Royalty Base Rates are applied
before final royalty amounts are generated

Deduction Rules are contract scoped and are evaluated independently for each applicable Operation.

They are configured directly inside the "Terms" section of a Contract Money Out.

How Deduction Rules work

A Deduction Rule follows a simple and deterministic structure:

If one or more conditions are met
Then add or deduct a defined number of percentage points to the applicable Royalty Rate

The rule is evaluated per Operation.

If the conditions are satisfied, the adjustment is applied to the Rights Holder’s Royalty Rate for that Operation only.

If conditions are not met, the standard Royalty Rate remains unchanged.

Adding a Deduction Rule

To add a Deduction Rule to a Contract Money Out:

Open the navigation menu on the left, click the "Royalty Accounting" icon, go to the "Legal" section, and open the "Contracts" list.

Open the relevant Contract Money Out.

In the Contract panel:

open the "Details" tab
then open the "Terms" tab

In the Royalty Splits section, click the "New Deduction Rule" button.

A Deduction Rule configuration block appears.

Deduction Rule name

Enter a clear and explicit name.

The name should reflect the contractual logic, for example:

"UK iTunes download reduction"
"Promotional streaming adjustment"
"Territory exclusion clause"

This name is used for auditability and long term maintenance.

Defining conditions ("If")

Conditions determine when the Deduction Rule applies.

Each condition is composed of:

a Deduction Type
an Operator
one or more target values

Multiple conditions can be combined.
All conditions must be satisfied for the rule to apply.

Available Deduction Types

Deduction Type	Description
Country	Country or territory of sale
Statement Provider	Source of the royalty statement
Source Provider	Upstream provider, when applicable
Retailer	DSP or store
Sale Date	Date or date range
Sale Type	Type of exploitation
Sale Subtype	Sub category of sale
Split Type	Royalty Split category

Condition operators

Context	Operator	Meaning
If	"is"	Condition is included
If	"is not"	Condition is excluded

Defining adjustments ("Then")

The "Then" section defines how the Royalty Rate is modified when conditions are met.

You can:

deduct points from the Royalty Rate
add points to the Royalty Rate

Adjustments are expressed in percentage points, not percentages.

Example:

Base Rate: 20%
Deduction: 10 points
Final Rate: 10%

Adjustments are applied per Rights Holder.

Reporting behavior

A Deduction Rule can optionally suppress reporting when the resulting royalty amount is zero or negative.

When enabled:

no Operation is generated for the Rights Holder
nothing appears in statements or analytics
balances are not impacted

This is useful for contractual clauses that explicitly exclude reporting below certain thresholds.

Use case example

A Contract specifies:

Base Royalty Rate: 20% on Digital Sales

Contractual exception:

iTunes download sales in the United Kingdom are subject to a reduction

Deduction Rule configuration:

If "Retailer" is "Apple"
And "Country" is "United Kingdom"
And "Sale Type" is "Downloads"
Then deduct 10 points

Result:

Standard cases: Rights Holder earns 20%
Matching cases: Rights Holder earns 10%

The Organization’s share is adjusted automatically.

Position in the royalty calculation flow

Deduction Rules are applied:

After Royalty Splits are identified
After Base Royalty Rates are applied
Before final royalty amounts are calculated

They provide controlled, auditable flexibility without altering contract structure.

Key principles to remember

Deduction Rules belong to "Contracts Money Out"
They modify Royalty Rates, not Splits
They are condition based and deterministic
They are evaluated per Operation
They preserve full auditability

Used correctly, Deduction Rules allow complex contractual clauses to be enforced reliably at scale.

Best Practices for Deduction Rules

When defining multiple Deduction Rules on the same “Contract Money Out”, it is important to ensure that their conditions remain clear, intentional, and non contradictory.

Follow these best practices:

Avoid creating multiple rules targeting the exact same conditions unless this is explicitly intended.
Prefer narrow and explicit conditions over broad rules that may apply unexpectedly.
Regularly review existing Deduction Rules when adding a new one, to ensure their combined effect is correct.
Use clear and descriptive rule names to document the business logic behind each deduction.
When in doubt, test rules incrementally rather than stacking several changes at once.

Deduction Rules are powerful tools. When used carefully, they allow precise contractual behavior. When misconfigured, they can silently alter royalty outcomes.

Clarity and restraint are essential.