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Royalty Audit Recoveries and Issues - Music

  • Incorrect royalty rates – Though the calculation of the reportable royalty rate might seem simple, too often mistakes are made and an incorrect royalty rate is applied to some or all royalty-bearing sales of physical or digital content.
  • Incorrect royalty base prices – The correct royalty base price is dependent on the agreement.  Often, the licensee will base royalties on a price too low, instead of the agreed upon base price.
  • Underreporting of units – The licensee may not pay royalties on all of the royalty bearing sales.  When they underreport the units, you lose out on the royalties you should have received.
  • Unreported sales – The licensee may fail to report sales simply because the incorrect information has been entered into their royalty system.
  • Excess costs charged – The licensee may charge you more than your fair share of deductible costs, and for other costs that are non-deductible as outlined in the agreement.
  • Excess free goods – There is usually a clause in the agreement that defines how record labels need to report royalties on free goods, verses those that can be royalty-free.  Often, they will withhold royalties on more than the allowed free good amount.

Other examples include:

  • Unreported income
  • Incorrect % share
  • Failure to increase royalty rates for new periods or escalations based on sales levels
  • Excess revenues withheld
  • Incorrect prices reported
  • Unauthorized distribution
  • Unreported territories
  • Royalty processing errors
  • Mathematical and input errors



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Hurewitz And Company • 2029 Century Park East, Suite 1700 • Los Angeles, CA 90067
Phone: 310-556-7745 Fax: 310-388-8494 Email: General@RoyaltyAuditors.com

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