I wonder if part of the justification has to do with recognizing the landing cost (bank and card fees) of the Credit Purchase transaction?
It may be worthwhile for @Finance to audit the accounting method around these transactions.
My policy suggestion would be that the revenue split (30% to co-op / 70% to rights-holders) be applied to proceeds after transaction fees. That is to say, a 5eu purchase of listening credits with 0.60eu in card and bank service fees would be treated as 4.40 net revenue to be split 30% (1.32eu) to the Co-op / 70% to Rights-Holders (3.08eu).
The alternative, and I think the present method the co-op is employing, treats ‘credits’ as a discrete value based on the gross receipt without adjustment for card and banking fees.
Using the illustration of 0.60 in banking and card fees on a 5eu purchase, this method of accounting would provide for the following spilt:
However, since the co-op is bearing all of the landing cost the split is effectively 18/70.
Co-op (net) = 1.50 - .60 (+12% landing cost) = .90 net revenue = 18% of gross to Co-op / 70% of gross to rights-holders. .
Final point: always worth mentioning.
Co-op revenues are not extractive profits leaving the community. Resonate’s receipts are essentially held in trust and committed to operations in service to Members. If the co-op generates an operating surplus it is the Members who will ultimately govern how surpluses are to be distributed (or reinvested).
My suggestion to Members who are sympathetic to the co-op’s mission is to equip the co-op with the means to be sustainable. In my view, the policy suggestion above offers a natural and equitable interpretation of the 30/70 principle as a split of proceeds.
To avoid confusion I have adjusted the figures in my illustration above to reflect what seems to be a common net receipt of 4.41 on a 5eu Listener Credit sale through Stripe.
There are additional charges applied to receive Stripe income as deposits at the bank but I will leave that to someone more expert to determine the average cost per transaction. (Probably less than the .10eu I estimated previously.)
These charges are quite variable depending on the size of the transaction, the number of transactions bundled together as a deposit and the security cost of clearing data charged to a particular bank card (some card data is considered riskier than others and therefore costs more to secure).
For the purposes of this illustration I have tried to show the high end of the potential landing costs. The costs do not generally rise in direct proportion to the size of a purchase so a larger purchase will have a lower percentage of landing cost than a smaller purchase.
It has to be after transaction fees. That’s money lost to both the co-op and artists. If only the co-op takes that burden its setting up an imbalance in our relationships within the co-op.
Proposal (draft): That @Finance review transaction costs to generate a reasonable net revenue adjustment (probably 12-15%) to be applied to gross receipts via an adjustment to the value of Listener Credits through the Player. (Perhaps there are other simple ways to transparently apply the adjustment.)
Finance could develop a test of actual receipts to periodically determine a fair adjustment (perhaps annually).
This procedure would be subject to review by the Members’ Audit Committee.
@Finance provide for a calculation of the net value of Listener Credits (LCs) based on the Total Net Receipts / Total Number of LCs Sold in a given period (quarterly?).
FWIW this is the position I took with respect to the label and distributor agreements I was negotiating in my role as @executive. It would be my advice to the team now.
Agree it has to be net of transactions fees which seem to be around 8% in Stripe. Also net of VAT when Resonate becomes VAT registered. Happy to start looking at this in more detail later in Feb. Would be helpful to see your process Rich.
