Monday, March 22, 2010

Music Business/Law Tips - Accounting/Royalties (Part 1)

An artist signed to a label and who has commercially released a record will look forward to the day when he or she can be paid royalties. The process by which an artist is paid royalties is called an "accounting". Incidentally, the accounting process discussed herein is also applicable to a songwriter with a publishing deal.

Accountings are generally made twice a year, within sixty to ninety days after the close of each calendar six-month period. The cut-off for the six-month periods are usually - but not always - June 30th and December 31st. Sometimes, labels make quarterly accountings, which is better for the artist because the waiting time for monies is less. However, on the flip side, some labels account only once per year. When an artist is accounted to, in addition to receiving a check (if any records were sold), he or she will normally receive a statement showing record sales and how the royalties were calculated. Because the artist will only receive royalties on records actually sold, as opposed to records shipped, in some instances an artist has to wait a long time to be paid.

The record contract usually will contain language which allows the artist to "object" to the accounting. An objection occurs when the artist questions the accuracy of the accounting. In other words, the artist believes he or she has been ripped-off. It is important for the artist to understand that the contract will specify a specific time limit to object; otherwise, the accounting becomes final ("binding") and the artist waives the right to audit or sue the label for breach of contract. The objection period is generally stated as being one year after the statement is sent to the artist. The artist should attempt to increase the period to two or three years.

[part 2 next week]

Ben Mclane Esq


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