Royalty Accounting Case Study: Finding $800k in Under-Reported Income

The challenge: Doubts around statement accuracy

Quite often an artist will come to us feeling like they are in the dark when it comes to understanding their royalty statements.

It’s not surprising. Exploitation these days is measured in millions of streams, not thousands of sales, and the statement data reflects that.

As a consequence, picking up accounting anomalies can be a challenge. Artists just can’t be confident that everything is as it should be.

Which is where we come in.

The review: A full desktop audit

A client of ours was about to re-sign with their label and wanted to be sure that the right thing was being done by them before they proceeded.

We were engaged to conduct a full desktop audit of their statements and agreements to put their mind at ease.

The artist had been in a worldwide agreement with the label for many years and through many different contractual amendments. We tracked all amendments and revisions, ensuring that updated terms were being considered and all the accounting made sense.

What we found: $800k in under-reported income

As part of our review, we “test” a lot of metrics. One is to back-calculate the original source income amount based on what is reported to us.

In this particular case, the maths was telling us that 45% of income was being clipped somewhere along the line.

That didn’t feel right.

After much digging, we found that one of the label’s international partners had set something up incorrectly in their system and was under-reporting back to the Australian subsidiary.

To the tune of $800k.

The inter-company numbers were never really questioned because the home label just reported what they received, and they were correct in that sense.

But it turned out that they were the ones being under-reported to.

The outcome: A make-up payment

The result was a nice make-up payment for both our client and the home label (you’re welcome).

Royalty accounting you can rely on

We love music. We want to make sure artists are paid every cent they’re owed.

Talk to White Sky’s Royalty Accounting specialists, Matt Bird and Kate Sloane. Complete the contact form to get in touch.‍