Productions Running Away to... Birmingham, Alabama?

Dozens of post-production/visual effects houses in the Los Angeles area have gone out of business over the past few years - or moved to locations such as Canada that offer tax incentives to producers.

According to anecdotes from visual effects artists and others who were formerly employed in LA post-production houses like Laser Pacific, it seems that most of LA's post-production jobs had moved outside the United States.

So, during a recent trip to Alabama for the 2016 Sports and Entertainment Symposium (SES), I was surprised to learn that one of the beneficiaries of runaway productions has been Birmingham and it's rapidly growing post-production house, Red Sky Studios.

With fellow speakers from the #SES #Sports and #Entertainment #Symposium

A photo posted by Cedar Boschan (@auditrix) on Apr 8, 2016 at 6:10pm PDT

Red Sky Studios' CEO Stephen Preston explains that Alabama's "film incentive covers 25%-35% of covered expenses."

Spend over $500K on #post #production in #Alabama, get 20-35% back in #incentives

A photo posted by Cedar Boschan (@auditrix) on Apr 8, 2016 at 4:45pm PDT

Should you have any questions about what Alabama production or post-production costs may qualify for Alabama subsidies and/or tax incentives, I met an accountant who audits production expenses to see whether they comply with the state law(s).  His name is Mark Underhill, CPA with Barfield, Murphy, Shank and Smith and I imagine he should be able to consult with you to answer your questions and ensure you or your client are complying with the relevant legislation.

Alabama's tax incentives and its growing track record of work (e.g., the visual effects in the movie Woodlawn, for example) are definitely driving expansion at Red Sky Studios, which is growing beyond Birmingham, Alabama;
Much of Red Sky Studios' work is performed on-site but some aspects are outsourced to foreign workers.

Red Sky Studios Woodlawn VFX Reel from Red Sky Studios on Vimeo.

On a private tour of Red Sky Studios in Birmingham, Alabama, we found the facilities to be nondescript (no sign out front) but impressive.

A theater and man at work at Red Sky Studios:

We hope Red Sky Studios enjoys so much growth that it opens an LA office.  There are plenty of underemployed visual artists and editors here, after all!

A Forensic Accountant Does Not a CPA or CFE Make

Beyond navigating all kinds of accounting and record keeping systems, a modern forensic accountant needs the ability to ascertain compliance with relevant regulations and/or contracts and, often, to process terabytes of information using sophisticated database software, plus the ability to communicate findings in a manner in which a layperson can comprehend.

It isn't easy to find an expert who possesses all of the above qualities and when you do, your counterparty will likely endeavor to bar the expert from auditing or testifying.

Some of the strategies to limit a party's top choice of forensic accountant include attempting to:

• Proactively limit contractually:
• Who can conduct an audit (e.g., requiring it be a CPA and/or nationally recognized firm, even though the "Big 4" accounting firms are not especially well regarded as royalty audit or forensic accounting experts and many are unwilling to take on such engagements)
• When an audit can be conducted by your auditor of choice (e.g., certain companies try to prevent the best auditors from conducting more than one audit at a time at any particular company)
• Reactively attempt to discredit your expert by attempting to equate the term "accountant" with "CPA" (although they are not the same) and frame your accounting expert's credentials solely in terms of CPA certification (or other certification or degree), even if the expert is opining on industry practice or damages calculations (and not a public-accounting-related matter, such as compliance with GAAP).

However, forensic accounting (including royalty auditing) is a private accounting service, not public accounting.  No official certification exists for "forensic accountants" or other forensic experts; neither CPA and/or CFE certifications, nor economics and/or statistics degrees validate that the bearer has the training or experience necessary to succeed in forensic accounting.  Although these and other degrees and certifications can have bearing on the suitability of an expert, depending on the particular case, a "forensic accountant" these qualifications do not alone make.

Modern forensic accounting is really a blend of:

• Accounting
• Eeconomics
• Industry expertise
• IT
• language arts
• Above-average understanding of certain legal concepts

While some CPAs, CFEs and economists have this, the vast majority do not, as I once observed when a highly degreed certified public accountant had a meltdown on the stand when he had to admit during questioning that he had no relevant expertise that pertained to the matter at hand.

Fortunately, the curriculum at the University of Southern California - where I studied under highly respected IP attorneys, accountants and economists - and my decades of work experience focus on all of the above areas, so I am a very well rounded forensic accountant, particularly in the entertainment and IP sectors, where I bring deep industry expertise.

My recommendations for finding the right auditor or forensic accountant for you or your client are to search for someone with a balance of industry expertise and relevant accounting and/or testimony experience.  Request the potential expert's CV, a list of cases in which they have testified and/or participated and client references.  If the potential expert forensic accountant doesn't ask a lot of questions and clear conflicts before learning details of the case, it is a red flag that he or she is inexperienced.

Finally, make sure you discuss your or your client's budget with the expert; a rate sheet alone won't tell you how many hours of work will be required on your case and if you think all you need the forensic accountant to do is spend an hour putting together a spreadsheet and signing a declaration that you drafted, you may be mistaken; although we often need to define the scope of an engagement to meet a budget, a forensic accountant's work is usually a bit more complex than meets the eye, so do not assume you know how much time a particular engagement may take.

Highlights from The California Copyright Conference's October 2014 Music Royalties Dinner

Last week, the California Copyright Conference presented a panel discussion entitled, "Are You Getting Paid? Best Practices for Unmatched Royalties"

October 2014 California Copyright Conference: L-R: Scott Berenson – Director, Claims Department at SoundExchange; Jake Wisely - President The Bicycle Music Company; Diane Snyder Ramirez – Vice President Royalty Accounting & Administration, Royalty Review Council; Chris Castle – Founder, Christian L. Castle, Attorneys, Austin; Anne Cecere – BMI, California Copyright Conference President; Not Pictured: Eric Palmquist - Vice President, Audit & Income Tracking, BMG Chrysalis

I tweeted a few insights from the panelists, such as:

One highlight was when panelist Chris Castle called on Henry Gradstein to speak on state copyright protection of pre-1972 sound recordings:

Henry Gradstein at the California Copyright Conference: Section 980 in California was amended to allow for common law (c) protection

But, a few tweets can't impart all of the valuable information that the panelists shared. To view the complete discussion, click here to join the California Copyright Conference.

#IRespectMusic

Eventually materials from the program will be uploaded here for anyone to access free-of-charge.