Key Takeaways:
- Royalty accounting errors and contractual breaches are widespread in the music industry, likely causing many artists to be underpaid.
- A comprehensive royalty audit examines contracts, income sources, expenses, and more to uncover underpayments and leverage for better deals.
- Even if no issues are found, an audit provides peace of mind by validating an artist is being compensated properly for their work.
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As a music artist, you work tirelessly to create art and build your career. But are you truly being compensated fairly for your creative output?
The sad reality is that royalty accounting errors and contractual breaches are rampant in the music industry, leaving many artists underwhelmed by their royalty statements. Even if you feel like you’re getting paid properly, there’s a strong chance you’re leaving money on the table.
The Prevalence of Royalty Issues
Auditing an artist’s royalty statements nearly always uncovers issues, whether it’s money owed or contractual breaches.
With the complex, multi-layered way music royalties flow these days — from streaming services to publishers to labels — there are numerous potential points of failure where sums can go underreported or uncollected entirely. Add in the many publishing and record labels being sold or merged, and mistakes become extremely common — whether caused by accounting errors, improper/failed registrations, or misinterpreted or ignored contractual language.
Causes of royalty shortfalls include:
- Registration issues like incorrect songwriter shares or wrong ISRC (International Standard Recording Code)
- Improper royalty rates
- Failure to pay bumped royalty rates after recoupment or certified sales levels
- Publishers failing to collect from all royalty sources
- Expenses improperly deducted from royalty accounts
- Uncashed royalty payment checks going unclaimed
- Lost/”leaked” revenue in accounting
- Improper sample clearances
Even if the dollar amounts seem small at first, contractual breaches can create powerful leverage for artists to escape bad deals, reclaim valuable copyrights, or renegotiate more favorable terms.
“A client came to me when he was trying to sell his catalog. I found a billion streams that his publishing company missed. He would have sold his catalog undervalued,” said royalty expert Dan Sassone.
Uncovering Hidden Revenue Streams
So how can you determine if you’re being paid properly? Embarking on a journey to reclaim lost royalties begins with a thorough examination of your income sources and contractual obligations. By conducting a royalty audit, you can uncover missed opportunities, rectify errors, and ensure compliance with your agreements.
While auditing your royalties is undoubtedly beneficial, the intricacies of the music industry can pose formidable challenges. This is where having a team of knowledgeable professionals on your side becomes invaluable.
Experienced auditors will first comb through your contracts to verify you’re being paid per the agreed rates, bumps, and terms. They’ll check that all income sources (streaming, downloads, broadcasts, etc.) are properly registered and being collected. And they’ll scrutinize deducted expenses line-by-line to validate their accuracy and approval.
This holistic approach can bring to light both overt underpayments and more obscured irregularities that surface-level audits often miss.
Key steps in royalty audits include:
- Source Verification – Scrutinize statements from royalty sources and streaming platforms to verify the accuracy of reported earnings. Even major platforms and publishers like Songtrust or BMI can overlook royalties.
- Contract Compliance – Compare contractual terms to actual earnings to ensure adherence to agreed-upon rates and conditions. Reviewing your contracts with a fine-tooth comb can reveal inconsistencies between what you’re owed and what you’re receiving, such as incorrect royalty percentages or unreceived bonuses.
- Identifying Discrepancies – Cross-reference data to pinpoint discrepancies between reported earnings and expected income. For example, instances of missing streams or incorrect ISRCs can result in significant revenue losses.
How a Royalty Audit Benefits Music Artists
As the industry’s royalty streams grow increasingly complex, taking a guarded stance with your revenue is good business practice. Your gut feeling is a powerful indicator. If you sense that something is off or that you should be earning more, chances are you’re onto something. Even if there aren’t any red flags, it’s still wise to validate you’re getting your full share for the music you brought to life.
Key benefits of royalty audits for musicians include:
- Receive Compensation – If there is money that you should have been paid, you may be able to recoup some or all of it or negotiate another form of compensation. Through this process, we have helped artists recoup thousands to millions of dollars they might never have realized otherwise.
- Gain Peace of Mind – Rest assured knowing that your earnings are being meticulously reviewed and optimized.
- Identify Bad Actors – Determine whether discrepancies stem from contractual misunderstandings, administrative errors, or deliberate misconduct.
- Support Legal Efforts – If you are involved in a legal dispute or pre-litigation, audit findings can help you address disputes, negotiate settlements, and safeguard your rights in contractual matters.
Take Charge of Your Royalties Today
Whether you’re a chart-topping sensation or an emerging talent, maximizing your earnings from royalties is essential to your long-term financial well-being. By conducting regular royalty audits, you can safeguard your financial interests, mitigate risks, and ensure that every note you play translates into the fair compensation you deserve.
How We Can Help
MGO is one of the only firms to offer in-depth royalty auditing services. Along with looking at payments, we also conduct a meticulous review of contracts, registers, rates, etc., to determine if anything is missing. Don’t leave hard-earned royalty money on the table — reach out to our team today.