A good friend of mine got his CPA as an older college student. Then he went to work for the big CPA firms in NYC. They used him for auditing and then spit him out at the end of audit season (after having told him, "You play your cards right and we'll put you on track to be a partner." Yeah, as if!). One audit he did is worth noting.
It seems this one former rocker whose group was filling the stadiums "back in the day" was accosted by a paparazzi and the rocker may have struck the paparazzi. He called his attorney when he got a letter from the alleged victim of his fist and asked for him to defend him. His attorney told him what it would cost to defend. The former rocker said, "But I'm broke!" His attorney said, "That's crazy—your music is still selling. In fact, my daughter just told me that she got your entire album from 1970-something on iTunes."
"I haven't received a royalty check for five years from anyone!" replied the former rocker.
His attorney, who drew up the contracts informed him that he had the "right to audit" the sales of his recordings. So, my friend Jim was hired to do the audit.
Here is what he found out:
- While they were a hot and up-and-coming group, the record company underreported (and under-paid) sales by 20%.
- While they were filling stadiums and touring, the record company underreported sales by 35%
- After the group split up and stopped producing music and stopped touring, the record company underreported sales by 40%, increasing to 100% over 15 years.
To say the least, after the audit, the record company agreed to arbitration and wound up paying the members of the group unpaid moneys and had to pay interest to keep the story from the press. Jim never told me who the band was, but he did tell me that I would know right away who they were.
So, the next time you see the recording industry whining about people stealing "their" music, understand that it's the artist's music you are stealing—if you are, indeed, illegally copying music. But also understand that the recording industry, themselves, are just as guilty—they blame you for what they, themselves do.