Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Protecting Record Producer's Interest In Music-Royalty Audit Scenarios

By Christian L. Castle
October 01, 2003

An unfortunate fact in the recording industry is that successful records result in audits by royalty participants. This is partly due to the entrenched distrust that artists have for record companies and partly to simple prudent business practices. If an artist sells hundreds of thousands or millions of units around the world, it would be the rare company that could move that many pieces of product without making a mistake. Sometimes the mistakes are just mistakes, and sometimes an audit holds up a mirror that reveals what happens under the record company hood – warts and all. And the “all” category can be very interesting.

An audit is usually conducted by an accountant to verify the books and records of the record company that back up accounting statements. From the record company's point of view, audits are a necessary evil. At major labels, the administrative cost associated with an audit is usually much more burdensome than dealing with any subsequent payments generated by the audit itself. In fact, fiscally sound record companies will reserve funds on the contingent-liability side of their financials to deal with audits that they know are in progress or are likely to occur. This reserve includes an unsegregated amount to cover artist, producer, mixer and remixer royalty payments.

To simplify their audit responsibilities, among other reasons, some years ago record companies largely stopped engaging producers directly, and began requiring artists to engage producers and bear the burden of accounting and paying producer royalties as a matter of contract. This put the producer in the awkward position of having to audit – perhaps even sue – the artist with whom the producer has a creative relationship.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Removing Restrictive Covenants In New York Image

In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?

Fresh Filings Image

Notable recent court filings in entertainment law.