Examples of Mistakes Made by Record Labels
Hover over the boxes below to see a sample of how errors can be made.
Incorrect Royalty Rates
Though the calculation of the reportable royalty rate might seem simple, too often, mistakes are made and an incorrect royalty rate is applied to some or all royalty-bearing sales of physical or digital content.
The correct royalty base price is dependent on the agreement. Often, the licensee will base royalties on a price too low, instead of the agreed-upon base price.
The licensee may not pay royalties on all of the royalty-bearing sales. When they underreport the units, you lose out on the royalties you should have received.
The licensee may fail to report sales simply because the incorrect information has been entered into their royalty system.
Excess Costs Charged
The licensee may charge you more than your fair share of deductible costs, and for other costs that are non-deductible as outlined in the agreement.
Excess Free Goods
There is usually a clause in the agreement that defines how record labels need to report royalties on free goods, verses those than can be royalty-free. Often, they will withhold royalties on more than the allowed free good amount.
Other examples include:
Excess revenues withheld
Incorrect % share
Failure to increase royalty rates for new periods or escalations based on sales levels
Incorrect price reported
Royalty Processing Errors
Mathematical and input errors