Sunday, November 30, 2014

The Royalty Audit: A Legal & Financial Concern

A “royalty audit” is more accurately described as a contract compliance examination, or a "contract audit." Thus, in four of five cases, the call to do a contract audit is made by a client's attorney, not its finance team.

Even in the infrequent cases when the call comes from a non-attorney, we like to involve an attorney if the client is willing to pay for it because we usually need a tolling agreement and our contract audits basically seek to quantify amounts due in connection with legal issues, so it helps to have an attorney available to consult as matters arise and in order to facilitate a settlement agreement or, rarely, file a legal complaint. Accordingly, our royalty and other contract audit work is actually expert consulting work that is a subset of our “forensic accounting” practice, all of which is for a legal purpose.

On the other hand, some attorneys see us as pure bean counters and if a client’s motivation for auditing a business partner is purely financial and it isn’t interested in paying us or an attorney to identify all breaches of the contract, just the accounting provisions, our work focuses as much as possible solely on the financial aspects of their contract.

Even in this case, a contract audit is unlike a financial audit that audits compliance with GAAP (aka an “assurance audit”), which Green Hasson Janks also performs.

One fundamental difference between an “assurance audit” and the contract audits we do: the client.  For example, if we perform a financial audit of a game publisher, the game publisher is our client. If we perform a contract audit of a game publisher, our client is typically a developer or other creator or licensor, not the game publisher, and the publisher is a counterparty to whom we are adverse.

#Thanksgiving Weekend Edition

The top items I shared last week among my Linkedin and Twitter followers:

Buffy Sainte-Marie said #NO:


"Elvis just recorded your song and we want some of that publishing $, honey."






#Giveback: holiday shopping on YouHambo


News from The Wall Street Journal:




***Litigation Update*** "...contracts will keep Run DMC's now-indigent lyricist in hot water over his lawsuit for royalties, a... judge ruled." - Courthouse News Service


Other Links of Interest:



Fresh #Gifts: #Travel #Journey #Fair #Trade


From http://jezebel.com/

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For more music news, follow me @Auditrix.  For interactive games and other IP royalty, business and litigation news, you should follow me @RoyaltyExpert.

Saturday, November 22, 2014

Best of Last Week



@jimmybuffett does ask terrestrial stations to pay royalties; he is part if the @musicFIRST coalition.

9 Spotify tools for hardcore music fans


Why Apple has a good shot at killing the freemium streaming music model @jillkrasny via @Inc



Cedar Boschan at the Beverly Hills Bar Association - DVD



Need MCLE credit? Check my panel: "Royalty Income Meets Marital Dissolution Dividing, Managing and Accounting"

Molly Neuman: From Riot Grrrl Founder to Indie Label Advocate - Digital Music News


Lady Gaga's Parsippany #producer loses $7.3M suit to #songwriter




Taylor Swift's Extreme Measures to Keep "1989" From Leaking via @YouTube


Study from Pandora Touts the 'Pandora Effect' on Music Sales | Billboard #promotionaleffect


Don Henley: Record Companies 'Not Going to Roll Over' on Copyright Issue | Rolling Stone



 Duke Ellington's grandson failed to show EMI broke a 50-year-old contract by diluting his share of the legendary composer's royalties, New York's highest court ruled.

RT @musicregistry: The Million Dollar Record Label Theft, & How It Came Crashing Down


Fortune: Pandora's plans for growth


An #iTunes #contract


 YouTube Stars More Popular than Mainstream Celebs per Variety

SiriusXM Slammed Yet Again As New York Judge Rules in Turtles Lawsuit - Hollywood Reporter



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For more music news, follow me @Auditrix.  For interactive games and other IP royalty, business and litigation news, you should follow me @RoyaltyExpert.

Sunday, November 16, 2014

Last Week's Top Links

Several popular items I posted last week on Linkedin and Twitter shared a theme named Irving Azoff:
The big news in the music business last week was YouTube's announced launch of its Music Key service. In addition to the above-linked Hollywood Reporter/Irving Azoff piece, most of the inquiries spurred by my "What is Content ID?" blog post last week were regarding YouTube Music Key subscriber revenue.

However, another popular YouTube tidbit that I shared with my LinkedIn connections had to do with good ol' advertising revenue: Per Jason Calacanis, "YOUTUBE has grabbed about 10% of television revenue"

More music items that engaged my connections on LinkedIn include:
My Twitter followers @Auditrix were most engaged in the following items:
On the copyright front, there was movement last week in one of the most interesting cases that I am following, between Smokey Robinson and his ex-wife, Claudette. Everyone I know who knows them both think it is too bad that they are litigating, so even though the issue of whether state community property laws or Federal copyright laws apply to royalties for terminated copyright grants is very interesting, I was nevertheless happy to read that the parties dropped their suit (see http://t.co/8pt5xyFxnQ) ...but, upon sharing this news in my @Auditrix Twitter feed, the reporter who has had the best coverage of this case - Eriq Gardner at the Hollywood Reporter - suggested that we have not seen the end of this dispute (see the link Mr. Gardner shared here and follow him on Twitter here).  In any event, if you are an attorney or business manager, keep an eye on this case - the outcome could impact your clients!

Tencent was another company in the news last week due to its partnership with Warner Music Group in China (see this, this, this and this), but the most popular bit that I shared about Tencent last week was via my @RoyaltyExpert Twitter feed, which focuses more on games than music: Tencent said that titles on its games portal QQ are better at making money than games on WeChat

Other top games items I shared last week:
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For more music news, follow me @Auditrix.  For interactive games and other IP royalty, business and litigation news, you should follow me @RoyaltyExpert.


Sunday, November 9, 2014

What is Content ID?

Content ID is a YouTube-owned tool that IDs copyrights embedded in content.

Copyright owners (i.e., record companies, publishers and, I assume, film and TV rightsholders) use Content ID to identify, tag, control and monetize content on YouTube.

The Content ID identification process starts when content owners provide Google with metadata and copies of their works. Content ID then uses digital fingerprinting technology to match these works to uses in certain categories of content on YouTube (e.g., matches to user generated videos, but not multichannel networks, which assume responsibility to pay rightsholders).

Not only can the © owner control (with other owners, if applicable) whether to leave the use up or take it down, but also it can choose to monetize (via advertising and/or subscriber revenue).  Some record companies get 35% and music publishers get 15% of ad revenue for user generated content.  (Big © owners can negotiate directly with YouTube, so those minimums and splits are confidential, but the some rates for indies are public, though they do not include the advances or minimums that major rights holders negotiate.)

Since > 1 billion users are on YouTube every day, it can generate thousands and even millions in earnings for well-managed content.  

Friday, November 7, 2014