In 2023 alone, Spotify paid out $9 billion in music royalties. The American Society of Composers, Authors and Publishers (ASCAP) reported $1.592 billion in royalty distributions to its members. And SoundExchange distributed more than $1 billion to creators. But even though these payouts were huge, artists and creators didn’t get all the money they deserved.
Based on the roughly 6,000 audits we’ve performed since 1971, we estimate that up to 95% of royalties reported by record labels, publishers, studios and motion picture companies are inaccurate. How, then, do you get accurate payouts? Look to your business manager and royalty audit team to ensure that you receive all the money you’re owed.
Here’s how your business manager can work with royalty auditors to strengthen your overall approach to royalties, so you get the past and future payments you deserve.
Your business manager starts the royalty audit process as a quarterback to the initial audit activities —selecting and managing the relationship with the CPA team that performs the audit and ensuring the CPA royalty experts have the data and records they need. Here’s a breakdown of what happens at the onset of an audit:
1. Gather information: To determine the scope of the audit, the CPA audit team requests the following from your business manager and attorney:
2. Schedule audit: Your royalty audit team reaches out to your label, publishing company, studio and motion picture company to get on their audit calendars.
3. Deep dive into data: Your label, publisher, studio and motion picture company provide information, for example:
The Royalty Audit team cross-references these source documents with your statements, ensuring songs, collaborations and royalty sources are accurately accounted for.
4. Reporting: The audit team presents their findings to you, your business manager and other necessary parties after performing their analysis. At this time, you may provide context into the intent of your contract if the terms are ambiguous.
5. Settlement: Once the discrepancies have been identified and additional royalties due are quantified, the royalty audit team supports your business manager and representatives by consulting in the negotiation of a settlement.
So, what does a royalty audit cost? That depends on a number of variables involving the complexity of the audit, including contract type(s), number of contracts, length of audit period, etc.
An audit typically yields a significant return on your investment. We frequently see recoveries of 10-30% and more of the royalties that were paid. And your audit team does the heavy lifting, so you can rest assured you’re getting the payouts you deserve while you focus on your craft.
Whether you’re an emerging artist or a big-name entertainer, you may wonder if an audit is right for you. The royalty audit team typically can eliminate the guesswork and do an initial analysis of your contracts and statements, at no cost, to determine if an audit makes sense in your situation.
Your business manager would be wise to put this task at the top of their to-do list. Here’s why: in most contracts, there’s a limit to how many years you can retroactively recover royalties. To make sure you don’t lose a recovery opportunity, it’s important to get the audit process started as soon as possible to preserve your rights and get on the auditee’s schedule without delay.
Royalty audits can pay off even more in the long term, thanks to a service called “prospective value.” Note that this is not an add-on expense; prospective value is already included as a standard part of the audit.
The royalty auditor may find that you are earning too little with your current royalty agreements. This is especially true if you agreed on a royalty percentage that doesn’t fully consider the impact of digitalization on entertainment.
If the audit reveals that your earnings are below the current market value, the auditor may recommend that your business manager renegotiate your contract. This renegotiation can significantly boost your future earnings.
A royalty audit is the only sure way for you and your business manager to know you’re getting every penny you deserve. Armanino has recovered over $1 billion in royalties for entertainers. See how one licensing firm got back $11 million in royalties and explore how our royalty audit experts can help make sure you’re not leaving money on the table.
Are you missing out on royalty revenue? Find out with our Royalty Leakage Calculator.
