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Territory-Based Recoupments: A Deep Dive

January 23, 2025
Global territory map

Territory-Based Recoupments: A Deep Dive

Territory-based recoupments are one of the most complex aspects of music label operations. In this guide, we'll break down exactly what they are, why they matter, and how to manage them effectively.

What Are Territory-Based Recoupments?

A territory-based recoupment occurs when an advance or investment is recouped from earnings generated in specific geographic regions rather than globally.

Real-World Example

Imagine you sign an artist and provide:

  • $50,000 advance for North America
  • $30,000 advance for Europe
  • $20,000 advance for Asia

With territory-based recoupments:

  • North American earnings recoup the $50,000 NA advance
  • European earnings recoup the $30,000 EU advance
  • Asian earnings recoup the $20,000 Asia advance

Each territory operates independently until its specific advance is recouped.

Why Use Territory-Based Recoupments?

1. Fair to Artists

Artists don't have to wait for global recoupment if one region performs better than others. They can start earning in successful territories sooner.

2. Better for Labels

Allows for strategic investment in different markets based on potential and risk.

3. Clearer Accounting

Separates performance metrics by region, making it easier to evaluate marketing effectiveness and make informed decisions.

The Challenges

Manual Calculation Complexity

Territory-based recoupments require:

  • Tracking earnings by territory
  • Applying different recoupment rates
  • Managing multiple currencies
  • Handling cross-territory advances
  • Calculating cascading waterfalls

Example Scenario

North America (Recouped):
- Advance: $50,000
- Earnings: $75,000
- Owed to Artist: $25,000

Europe (Partially Recouped):
- Advance: $30,000
- Earnings: $20,000
- Owed to Artist: $0 (still $10,000 unrecouped)

Asia (Not Recouped):
- Advance: $20,000
- Earnings: $5,000
- Owed to Artist: $0 (still $15,000 unrecouped)

Total Artist Payment: $25,000 (from NA only)

How RevSplit Automates Territory-Based Recoupments

1. Simple Setup

Configure your recoupment structure once:

  • Define territories
  • Set advance amounts
  • Configure split percentages
  • Set recoupment priorities

2. Automatic Tracking

RevSplit automatically:

  • Categorizes earnings by territory
  • Tracks recoupment progress
  • Calculates payments correctly
  • Handles currency conversions

3. Clear Reporting

Artists see exactly:

  • How much is recouped in each territory
  • Current earnings by region
  • Projected recoupment dates
  • Historical performance

4. Flexible Rules

Support for complex scenarios:

  • Cross-territory recoupment (optional)
  • Waterfall calculations
  • Multiple recoupment sources
  • Time-based terms

Best Practices

1. Document Everything

Always have clear, written agreements specifying:

  • Territory definitions
  • Advance amounts
  • Recoupment terms
  • Split percentages after recoupment

2. Communicate Regularly

Provide artists with:

  • Quarterly recoupment reports
  • Territory-specific breakdowns
  • Projected recoupment timelines

3. Be Consistent

Apply the same rules consistently across:

  • All artists in your roster
  • Different types of advances
  • Various deal structures

4. Plan for Success

Consider what happens when:

  • All territories are recouped
  • One territory significantly outperforms
  • Currency fluctuations impact earnings

Common Pitfalls to Avoid

❌ Not accounting for currency fluctuations
✅ Use consistent conversion rates or set terms in one currency

❌ Unclear territory definitions
✅ Clearly define which countries belong to each territory

❌ Forgetting about distribution costs
✅ Decide whether costs are deducted before or after recoupment

❌ Lack of transparency
✅ Provide clear, detailed statements showing recoupment progress

Setting Up in RevSplit

Here's how easy it is:

  1. Create Deal: Navigate to Deals > New Deal
  2. Define Territories: Select or create custom territory groups
  3. Set Advances: Enter advance amounts per territory
  4. Configure Splits: Set post-recoupment split percentages
  5. Add Rules: Set any special conditions or waterfalls
  6. Activate: Start tracking automatically

The system handles everything else, categorizing earnings, tracking recoupment, and generating clear reports for you and your artists.

Conclusion

Territory-based recoupments don't have to be complicated. With clear agreements and the right tools, you can implement sophisticated deal structures that are fair to artists and beneficial for your label.

Ready to simplify your recoupment tracking? Try RevSplit free for 30 days and see the difference automation makes.