More transparency needed in the Royalty process

Well I don’t want to oversimplify a very complex process, but with artist audits and lawsuits becoming even more common place it appears the Music industry needs to completely transform the way they handle their Royalty processes to bring complete transparency to their Artists as early and as thoroughly as possible.

Artists have employed professional management companies well experienced in all aspects of managing their affairs. Record companies have employed large departments who perform detailed reviews of Royalty statements before sending them, together payments if applicable, to the artist. However, reviewing tens of thousands of statements each statement period, with large volumes and huge time pressure means that errors and omissions are bound to creep in undetected. Being under constant cost constraints does little to help the situation as record companies address decreasing revenue by reducing headcount every year. How does one resolve this constant downward spiral – how do the detailed checks required to avoid errors or omissions get done with ever reducing manpower? Without it, Record companies will inevitably face even more audits causing further pressure on the already stretched Royalty departments as more artist audits ensue… and worse, the heavy costs and penalties when errors are found.

It seems to me the solution is staring us in the face – involve the artist management company in the process! Instead of simply sending them a completed statement for review at their leisure, involve them in the process early. Transform Artist Management Companies from being beneficiaries of the process, to fully involved stakeholders in the process. Here’s how it works: after the royalty administrators have reviewed the statements and had them signed off by business affairs, include a stage for Management Company review where they are given the access and information required to sign off the statement. Apart from identifying issues at this early stage and therefore avoiding potential audits, a key benefit of this approach is improvement in artist relations by involving them and their Management Companies very early, improved transparency through fuller visibility much earlier in the process.