So who do you trust with your royalties, anyway? This is a fight that goes way beyond Sirius and SoundExchange, and a major sticking point throughout will be transparency. Which is why Sirius' backend royalty processor just underwent a rigorous auditing process, one designed to further convince labels to switch teams for satellite radio royalty administration.
The company behind the scenes is Music Reports, Inc., which is powering Sirius XM Radio's recent direct licensing initiative with labels. And, they mean business: Music Reports is now preparing to announce the successful completion of what is known as a 'Statement on Standards for Attestation Engagements (SSAE) No. 16 Audit,' essentially a financial rectal exam of the most thorough variety.
And, they passed, according to details shared with Digital Music News. "Successful completion of the rigorous SSAE 16 audit is further validation of the fact that Music Reports is the clear choice among service providers for companies whose businesses rely on the effective management of music rights with complete transparency and security," explained Doug Brainin, Music Reports president and CEO.
The reasons for this move are obvious. If Sirius is sending letters to labels asking to directly collect and administer their royalties, it helps to know that the company doing the work is clean. But there's also a very overt jab at SoundExchange, a group that routinely finds itself on the defensive over considerable unpaid royalty tranches, confusing royalty payment systems, and messy issues like bad metadata and unregistered artists.
Actually, SoundExchange does have an independent auditor: PricewaterhouseCoopers. But a lot of this messiness goes beyond auditing. For starters, Music Reports and Sirius are hoping to bypass a complicated system that involves direct payments to artists, which quickly lowers the number of payees but also reintroduces another very messy problem: labels themselves.
And here's where things get really dirty. All too frequently, labels are caught red-handed bilking their own artists. But history has also shown a near-systematic refusal to compensate artists at some labels, a problem that isn't just restricted to the majors. And most of these labels aren't exactly undergoing rigorous, self-administered audits, to say the least.
/paul. Written while listening to From First to Last.
aa Friday, December 02, 2011
the ugliest part of major labels is accounting. say what you will about A&R, lobbying, legal action toward consumers last decade, but shady accounting is the worst.
itsalive Friday, December 02, 2011
aa: it's worse than that it's part of the business model at majors. keep costs down, and artists are a cost. there needs to be some auditing of labels but it'll never happen.
why is it a problem? Friday, December 02, 2011
Isn't auditing by the IRS mandatory for all US companies? Over here in Europe, the equivalent agencies make surprise audits all the time.
brooklyn habitat Friday, December 02, 2011
I didn't even know Sound Exchange had an auditor until I read that, but even if a label is stealing it's often contractual not something that would get flagged by an auditor. It's a deduction times X and reduction times Y placed in a reserve account over there and next thing you know the artist owes you money.
aa Friday, December 02, 2011
you're right. there are definitely bogus "costs" included. i think "packaging" is still included as a deduction on digital royalties for example.
however, there are scads of examples of: "oops, we seemed to have forgotten about that $100,000 in royalties that you've earned...."
and that is where an audit would really hurt.
Read Donald Passman.
Jeff Robinson Friday, December 02, 2011
Speaking of Audit, who thinks Apple has been totally above the board with iTunes? How about the distributors that send music to them? They say 70% of music sales in the U.S. are from iTunes, is all reported? Just sayin', why the scrutiny of Peforming Rights Organizations when there is greater money to be made with the world's largest music retailer?
Lily Friday, December 02, 2011
The Apple/iTunes setup is always online for the distribution admins, so you can track what the various catalogs sell, at any given time.
JB Saturday, December 03, 2011
Guys, are you kidding? you don't think major artists get audit rights in their contracts? they do, and they utilize them. and the majors audit itunes periodically as well. and i'll say this about the label i worked for (umg)...they negotiated with artists hard, but they paid what was owed. in fact, when they won a bunch of money in lawsuits against the likes of kazaa and youtube, they shared that too. i'm not saying they don't interpret things their way when it's gray, but it's not like they're falsifying sales reports and hiding revenue from something as clear as cd and download sales.
Label exec Monday, December 05, 2011
this is why SoundExchange is the ONLY choice in this debate -- because they pass the artist portion DIRECTLY to the artist, they don't send it to the label where it could disappear into a black hole. if MRI admins these royalties, they will send all the money to the labels, and the artists run the risk of never getting their portion. that alone should keep people from signing up with MRI.