Royalty statements in the US: what contracts ask for

In the US, royalty statements are set by the contract, not by a national law. And in California, the law gives artists the right to check the label's books. Here is what to know.

This page informs; it is not legal advice. Every contract sets its own rules, and which law applies depends on the contract.

A turntable playing, next to seven-inch singles.

The principle

No national law, contracts

In France, article L212-15 of the Intellectual Property Code requires labels to account to artists every six months. To our knowledge, there is no federal equivalent in the US: how often statements come, what they contain and when they are due all come from the artist's contract.

In practice, those contracts look alike. Descriptions of the trade speak of statements every six months, for January to June and July to December, sent two to three months after each period ends.

What you often find

The accounting clauses, one by one

An exclusive recording agreement signed in 2008, made public when it was filed with the SEC, shows these clauses in black and white.

Twice a year

Royalties are worked out every six months and paid within 60 days of each June 30th and December 31st.

Statements more often

The same contract calls for a statement within 60 days of each quarter, even though payment stays twice a year.

A year to object

The artist has one year from the mailing of a statement to object to it in writing; after that, they can't.

One audit a year

The artist may have the books audited at most once per calendar year, with thirty days' notice to the label.

Royalties earned hereunder will be accrued semi-annually and paid, less all advances, taxes, and any other charges, within sixty (60) days following each June 30th and December 31st.

Exclusive Recording Artist Agreement, G2 Ventures, Inc. and Nick Brisco, September 8, 2008, section 7.01 · The agreement, on the SEC's site

In California

A right to audit, written into law

Since January 1, 2005, sections 2500 and 2501 of California's Civil Code give anyone who is owed royalties on recordings the right to audit the books of whoever pays them, whatever the contract says.

The law frames that right: at most one audit a year, requested within three years of the end of the royalty period in question. It covers contracts governed by California law.

At most one audit a year
Requested within three years of the period
Whatever the contract says

A pen pointing at a table of figures, next to a calculator.

In practice

Be ready when an artist asks for the numbers

Whether it comes from a contract or from the law, an audit is prepared the same way: by being able to show where every figure comes from.

1
Keep every report
Your distributors' reports, as they arrived, for every period.
2
Tie every figure to its source
Every line of a statement should point back to the report lines it comes from.
3
Leave a closed period alone
A statement that was sent should never change quietly: a correction goes into the next statement, where it shows.
4
Keep contracts and invoices
The signed terms, the advances paid and the invoices behind recouped costs.

Questions

My contract says nothing about how often statements are due. What now?

Talk to a lawyer. This page describes what you often find, not what applies to your contract.

What about outside California?

This page only describes California's law; elsewhere, look first at what your contract says, and ask a lawyer.

Does Labelmate suit a US label?

The work is the same: reading reports, applying contracts, recouping advances, issuing statements. The app is in English, and we set up your distributor's format with you.

With Labelmate

Statements that stand up to an audit

Labelmate ties every line of a statement to the report lines it comes from, and the source reports are named in the statement. Once a period is issued, its figures no longer change.

Every statement is archived as PDF/A, with its fingerprint and the calculation data attached to the file.