Royalty Compliance & Audit Support for Entertainers and IP Owners

Royalty compliance and audit support are meant to aid entertainers and intellectual property (IP) owners verify their royalty payments are accurate, complete, and reflect their contractual obligations. These services verify how royalty payments are calculated, review royalty reports from third parties, identify possible royalty payment underassessments, and audit oversight to music, films, digital content, licenses, and revenues from worldwide distribution.

Due to the complexity of the systems, such as a label, publisher, streaming platforms, PRO, studios, or international collection societies, compliance checks are required to prevent loss of revenue stream to such oversights from the systems in place to ensure the royalty revenue streams to the artist, creator, writer, producer, or rights holder.

Why Do Entertainers and IP Owners Need Royalty Compliance Services?

Dealing with royalties can get complicated and messy. This gets even more difficult when your IP is being used in multiple locations and through different channels and platforms. This is where royalty compliance services come in. They make sure all owed royalties are calculated, reported, and paid. Here are some reasons why entertainers and IP owners require these services:

• Misinterpretation of contracts
• Inconsistent or outdated accounting systems
• International report delays
• Issues with digital streaming metadata
• Licensing deals that have not been reported
• Errors in recoupment and expense charges
• Manual entry by labels and distributors

Most creators are still owed data, so for compliance reviews, they make sure these creators get everything they are owed.

What Does Royalty Compliance Include?

Royalty compliance is making sure that royalty calculations are done accurately within contracts, statements, and financial documents. Most compliance reviews contain:

• Analysis of contracts (rates, rights, territories, recoup terms)
• Statement confirmations from labels, studios, publishing rights, and PROs.
• Streaming and sales data analysis.
• Cross-checking dashboards of digital platforms.
• Review of international royalty collections.
• Verification of licensing and sync usages.
• Reconciling expenses and deductions.

However, compliance is not only about problem solving, it is about problem prevention and making sure issues don't escalate.

What Is Royalty Audit Support?

Royalty audits prepare entertainers and IP owners for, and assist them in, audits. Audit support confirms that the third-party data is accurate, the rights holder is aware of what to look for, and any imbalances are documented thoroughly.

Audit support generally consists of the following:

• Preparing document requests
• Organizing contracts and statements
• Identifying royalty categories that are high risk
• Analyzing data that is missing, inconsistent or insufficient
• Communicating with labels, publishers, or studios
• Supporting negotiations for overdue payments
• Offering an expert explanation of the findings of audits

With audit support, creators receive the representation of an advocate, while also having the support of a specialist.

Who Should Use Royalty Compliance & Audit Support Services?

Any entertainer or rights holder who earns income from creative work can benefit from these services.

This includes:

• Recording artists
• Songwriters, producers, and publishers
• Independent musicians
• Actors, performers, and directors
• YouTubers, digital creators, and podcasters
• Authors and literary rights holders
• Film/TV rights owners
• Game developers and animation studios
• Brand owners with licensing agreements

If you earn royalties, licensing fees, distribution income, or residuals, compliance and audit support help secure your revenue.

What Problems Can Royalty Compliance and Audits Uncover?

Some difficulties that come up during royalty audits are as follows:

• Data on streams that are either not reported or reported inaccurately
• Mistakes in calculations of royalty tiers
• International royalties that are not sent to the U.S. rights owner
• Nonexistent synchronization or licensing payments
• Mechanical royalties that are understated
• Wrong expense deductions or raised costs are observed
• Revenue allocated incorrectly among joint contributors
• Residuals that are discharged are misassigned or not paid at all

Since most companies in the entertainment sector manage large catalogs, minor issues tend to build up over time.

How Does the Royalty Compliance and Audit Process Work?

The following is a simple, step-by-step, outline of this procedure:

1. Contract Review: The first step in this process is looking over contracts to find out the royalty rates, payment schedules, payment territories, right to audit, etc.
2. Collection of Royalty Data: Creators submit royalty statements, streaming reports, sales reports, and the digital dashboards they have access to.
3. Independent Data Verification: The auditors check the company's internal statements to a set of external, defined metrics, like these:

• Social media/professional streaming platform
• PRO Data
• Licensing info
• Sales and distribution info

4. Detection of Issues: Each payment discrepancy, including missing funds and math mistakes, is tracked and documented.
5. Prep for and/or Action Audit: If the issue is material enough, the company will either prepare for a formal audit or assist in the completion of an audit already in progress.
6. Recovery and Negotiation: Negotiation with the applicable parties is performed to achieve payment of owed funds and to ensure they will correct their practices in the future.

What Are the Benefits of Royalty Compliance & Audit Support?

IP owners and entertainers alike will gain:

• Realistic revenues pegged to income from actual usage
• Cross-platform and partner transparency
• Guarding against underpayment
• Recovering verification (a key origin of discrepancies)
• Enhanced readiness for audits
• Stronger negotiation leverage for new agreements
• More efficient tax filing pinpointing income accurately

The audit of just one of these areas of compliance, for many creators, can identify revenue potential from many previous years of lost opportunities.

How Much Can Creators Recover Through Royalty Audits?

An audit indicates that many rights holders retrieve between 5% to 30% of unpaid royalties. The amounts that royalties can recover range from:

• The intricacies of a contract
• The many platforms or distributors
• The catalog's age
• Activity abroad
• The contract's usage

Because of their large and diversified income, top-earning creators are more likely to find these major gaps.

When Should Entertainers Request Royalty Compliance or Audit Support?

These services could be worth your time and money:

• If you're working with multiple publishers or distributors.
• If you see your royalty payments and they are lower than industry averages.
• If you're noticing international revenues and your contracts are set to expire soon.
• If your streaming numbers are increasing, and you're seeing no additional income.
• If you're preparing for a royalty audit.
• If you're seeing inconsistent, or in some cases, completely missing data.

Most rights holders should seek compliance reviews every couple of years.

Need Help With Royalty Compliance or Audit Support?

Working entertainers, artists, and intellectual property creators and owners must make sure they have the proper professional compliance, and artistry audit assistance, so that no money is being left on the table. In the U.S., Dimov Audit offers royalty reviews, audit prep, tax strategy, and contracting analyses for performers and rights owners.

Want assistance with royalty income? Dimov Audit is here to help.

FAQs

What Royalty Compliance Is vs Full Audit?

Reviews of statements and calculations vs audits of contracts and full financial records for a partner are what differentiate compliance and audits.

Can Individual Artists Access These Services?

Yes. Independent artists release creators digitally, but may face errors in reporting and therefore can benefit greatly from compliance.

What Is the Average Royalty Audit Duration?

There are audits that can last 3-6 months. The duration is often based on the complexity of the data and data response times from other businesses.

Do I Require A Lawyer or A CPA for Royalty Audits?

The financial analysis would be best performed by a CPA that focuses on the entertainment industry. A lawyer would also be required to address any issues that stem from the findings.

Can Royalty Compliance Assist With Taxes?

Correct royalty reporting assists a lot with compliance and reporting required for income claiming, tax deduction for expenses, and tax organization on a long-term basis—especially for creators with multiple revenue streams.

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