When It Comes To Royalties, Sometimes The Best Thing Artist Reps Can Do Is Manage Expectations.
Beverly Hills CA. September 16th 2009. At this month’s Beverly Hills Bar Association luncheon Los Angeles entrainment lawyers learned exactly how screwed some of their high profile clients are if they’re expecting big payouts from film and record companies. Holding court was California Power Attorney Neville Johnson (Johnson & Johnson) who moderated a panel of three industry royalty auditors. Each revealed tricks of auditing in the film and music spaces.
I focused my attention on auditor, Matthew A. Hurewitz, managing partner, Hurewitz, Boschan & Co. LLP. Matthew has more than 18 years of experience and according to his resume, has helped recover millions through audits.
The first line of defense, according to the panel, might be managing expectations when artists read about a hit in the trades and then open up their first royalty check. “Typically you can expect between 10% and 40% error” in shortchanging of royalties, said Hurewitz.
Now if you’ve had a platinum record and you’re looking forward to over a million in royalties then this can be significant enough amount to justify an audit, which according to Hurewitz can cost anywhere from $25 to $100,000. But what about the middle-class artist who is short changed only five or ten thousand? How does he get justice? Hurewitz claimed that often when approaching labels to do an audit he’s met with a reassuring smile and a claim, “We’ve already done an audit and it appears that YOU owe us.”
Also on the panel was Fred Wolinsky (Wolinsky & Becker) who testified for The Ronettes against Phil Spector. He warned that in situations when artists are paid off of “net profits” the cost settlement fees from an audit can be deducted as a recoupable expense for then next payment period.
Over in 360 land Hurewitz implied that labels have been excluding some of the income generated from the now-greatly-expanded 360 revenue pie. “Stock ownership and cash” says Wolinsky, “I guarantee you labels… [are not] reporting it to the act.”
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Yeah, well, here’s a challenge. Find an attorney who’ll go to bat for “the middle-class artist who is short changed only five or ten thousand.”
I tried for years when I had clear and convincing evidence that Warner Brothers was screwing me. But talk to an attorney and it’s “I’ll go after them, for a $5000 retainer.” Or, “It’ll cost you more than you’ll ever get out of them.” Or, “That’s not really enough to justify my time.”
Take your pick of excuses. They’ve got five or ten thousand of them.
We don’t need lawyers to tell us we’re getting screwed. We already know it’s the corporate lawyers who are screwing us! And I notice neither you nor Hurewitz offer any answers or solutions to your rhetorical question.
So, thanks for the hand-wringing, but most of us don’t live in LA, most of us can’t afford these people, and most of them don’t give a shit.
Not to toot my own horn but the Moses Avalon Company settles disputes like this for fees far lower than traditional mediation or court. Perhaps we can help. 10% of all fees go towards artist’s rights advocacy efforts.
The careers of recording artists in the future will not be created from the record company penthouse DOWN. They will be built from the cyber-grass-roots UP. Artists must liberate themselves from the tyranny of record companies. They must focus on selling their music directly to the fan base created from their live performances. 360 degree deals are a vain attempt to control the talent pool. they ignore that the label is the traditional enemy of artists. The marriage will end in divorce. Nobody needs hundreds of thousands of dollars to make a record; that can be done for free on any college campus. All the labels can offer is radio; but who is listening? That is why sales of one hundred thousand units will give you a number one record in Billboard. Artists should own their masters and publishing and market themselves on the Internet. Sure its crowded with mediocrity, but that has always been the case. Everybody with a Mac and amic is not talented. Ten percent of the artists will make one hundred percent of the money. The other ninety percent will be sucked down the black hole of broken dreams.
Thank you Moses for the great information.
I agree with John and JJ. If you don’t have the money to fight them, you shouldn’t sign a deal, unless it involves heavy penalities that free you and your music if you can prove they haven’t been straight with you. All the majors are now is a high interest bank with some connections for promotion, which they may or may not use to help you. It’s time we learned how to do it ourselves, maybe be famous just locally, maybe make less money, but keep all the control. Sounds pretty awesome right now. Famous people look pretty miserable anyway
I’m a CPA who knows auditing . Royalty audits are a newer area for me, but I’ll be glad to at least look at some examples of the small dollar situations you guys mention. If someone feels they are owned $10,000, I think I can make that work.
feel free to email me at sspitzer at smith-howard.com