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It is better to make a piece of music than to perform one, better to perform one than to listen to one, better to listen to one than to misuse it as a means of distraction, entertainment, or acquisition of "culture".

~John Cage

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About Us

Our Team

about The ART GroupFounded by experts in music royalty accounting, The ART Group has grown into the leading team of specialists that provide financial consulting services for media and entertainment companies. We work with CFOs, business affairs and in-house royalty teams, including major and independent record labels, music publishers, book publishers, websites, content publishers, film & television studios and video game distributors. Using our consulting services and applications, we help fuel higher revenue through improved business intelligence and help reduce operating costs using our systems and experience. The ART Group ServicesSince we started, our services have grown to include Digital Audits, Outsource Royalty Accounting, Song Catalog Due Diligence and Specialized Financial Consulting Services for media and entertainment companies. We have worked with all the major record companies, as well as many independent copyright owners and content publishers, becoming the premiere independent media and entertainment financial consultancy. We are recognized as one of the first independent companies to build new infrastructures for managing, processing and reporting royalties from traditional and new digital business, including all download, subscription, webcast, stream and pay-per-play business around the world through channels of distribution or purchase such as kiosks, computers, TV set top boxes and wireless devices.
Services

Royalty Reconciliation

Royalty Accounting

Financial Services

Royalty examinations The ART Group provides worldwide professional Royalty Audit services in the determination of the amount of unreported and/or underreported royalties generated from the licensing of and/or illegal use of creative works (e.g. music copyrights, record masters, video games, films, television shows, audio books, etc.). Our Royalty Audit service includes both physical distribution and digital transmissions (i.e., downloads, subscriptions, webcasts, streams, and pay-per-play businesses through channels of distribution or purchase such as kiosks, computers, TV set top boxes, and wireless devices).We provide professional services for worldwide royalty audits:•Examinations of Digital Service Providers on Behalf of Record Companies, Music Publishers, Book Publishers, Game Companies and Film & Television Studios•Record Company and Collection Society Examinations on Behalf of Recording Artists, Producers, Publishers, Executives and Licensors•Music Publishing Company Examinations on Behalf of Songwriters, Publishers, and Administrators•Examinations of the books and records of licensors, licensees, and collection organizations on behalf of Sound Recording Copyright Owners and Featured Artists entitled to sound recordings performance right royalties in the context of webcast, cable, and satellite transmissions•Merchandise Examinations on behalf of trademark ownersPioneers in Digital Service Provider AuditsWe are the pioneers in the development of procedures to audit online digital service providers. We have blended the traditional procedures of a royalty exam with review procedures related to the servers that control, count, and identify content to be reported to licensors. Our procedures cover most digital transmissions (i.e. download, subscription, webcast, stream, and pay-per-play businesses). In each audit, we research original licensing agreements, review data and system workflows, investigate payment procedures and issue a comprehensive report of our findings. Experienced Royalty AuditorsOur management team includes royalty audit professionals who were responsible for the direct oversight of the contractual compliance of the royalty payment terms for new releases, catalog products, and special market licenses at the major entertainment companies. Most royalty audit firms only understand the entertainment business from the outside - we understand the complexities and nuances of this business from the inside. Our experience is invaluable in determining unreported and/or underreported revenue and royalties. Members of our professional team include Certified Public Accountants and Fellows of the Institute of Chartered Accountants . The ART Group is affiliated with a number of independent accounting firms and consulting firms outside the U.S. to provide worldwide professional staff support.
Outsource royalty accounting servicesDuring these challenging times for the entertainment industry, royalty accounting still needs to be managed, and The Art Group can help you by providing assistance that bridges you through the downturn. To help manage your costs, we offer three specialized royalty accounting services:Outsource Royalty AccountingThe Art Group provides a complete turnkey, cost-effective, professional alternative to a traditional in-house royalty department, eliminating the staffing overhead and technical complexities of managing a part-time or fully-functional in-house royalty department. We offer a viable solution for any company that is required to process music, home video, film, publishing or video game royalty and participation statements. We can process your statements using our systems.Remote Royalty ManagementIf you have already licensed royalty accounting software, you probably invested in advanced features designed to handle your reporting requirements. The software, however, is only part of the solution - it takes experienced, knowledgeable staff to set up the catalog, contracts, rates and payees. We can provide the manpower and expertise you need to leverage your investment, remotely accessing your royalty systems to process statements.Royalty StaffingSince The Art Group is heavily entrenched in royalty accounting, we recruit and work with seasoned and informed staff. Our Royalty Staffing service allows us to assist you in a unique way: from the inside. Working as part of your team, we can put qualified staff on site to get your royalty accounting needs addressed using your existing systems.For more details about music royalty accounting, please see our Music Details and Service Detailspages. Royalty and Participations Accounting for the Entertainment IndustryOur services are available to major labels, independent record labels, music publishers, distributors, webcasters, performance societies (PROs), recording artists, songwriters, digital distributors, wireless phone companies, media players, home video companies, studios, book publishers and video game companies. Royalty Processing in the Digital MarketplaceWe are recognized as one of the first independent companies to build new infrastructures for managing, processing and reporting royalties from both traditional and new digital businesses. Our systems facilitate electronically importing sales data from all the major digital service providers, including iTunes, Napster, eMusic and Real. We also assist companies who license catalogs from third parties for physical distribution or digital transmission over the Internet, cable, or wireless networks and are required to render royalty statements, reports, and payments. This includes new digital businesses, including all download, subscription, webcasts, peer-to-peer (P2P), streams, and pay-per-play businesses around the world through channels of distribution or purchase such as kiosks, computers, TV set top boxes, and wireless devices. Our Royalty Software InfrastructureWe utilize a variety of sophisticated royalty software systems specifically designed to fully automate the processing of royalty calculations and ensure that royalties of all types have been calculated accurately. Our systems are constantly updated to manage the evolving royalty reporting requirements associated with new sales channels, new formats, new royalty provisions, which are tailored to the needs of our clients. key benefitsWhether you are a start-up or a large organization, our systems and experienced royalty staff can oversee, calculate, and process your royalties and statements. Outsourcing provides a rapid and cost-effective turnkey solution for your operation. Cost SavingsBy outsourcing your royalty accounting needs you will avoid the costs associated with the purchase of a royalty administration software program, recurring royalty software license fees and updates, royalty software training courses, additional computers, and the overhead expense of an experienced royalty staff. ScalabilityWe can scale to your needs. Your company can mitigate the risk of the overhead expense necessary to maintain a fully-functional royalty department staff to manage an unknown level of royalty accounting needs. Industry ExperienceLeverage our industry experience! Since members of our staff have many years of experience in processing royalties, we know where problems arise and how to handle them. We understand contracts, licensing and royalties from the inside.
Strategic financial consulting servicesThe Art Group is known in the entertainment and new media industries for our financial skill and knowledge in complex matters related to accounting, reporting, copyrights, and licensing of creative works (e.g. music copyrights, record masters, films, merchandise licenses, etc.). In addition to our main services (Royalty Audits, Royalty Accounting, and Song Catalog Due Diligence), we offer a valuable mix of strategic consulting services support services: Litigation Support and Expert TestimonyWe act as expert witnesses and litigation consultants to assist clients and attorneys Distribution RightsAnalysis of the distribution rights of existing licenses for new business models and acquisitions Distribution LicensesAssistance to obtain required licenses for the distribution or transmission of creative works Royalty Reporting RequirementsThe review and/or identification of the data collection and royalty reporting requirements to licensors associated with the exploitation of licensed sound recordings and licensed musical compositions by methods of distribution such as kiosks Operating Scenario ModelingSpreadsheet modeling as it relates to traditional music industry royalty accounting and/or your particular business model to enable you to project various operating scenarios from the sale of creative works Audit Report ReviewReview and response to audit reports submitted to records labels and publishers to determine the accuracy of the claims and the amount payablesong catalog due diligenceThe Art Group assists potential buyers in assessing acquisition opportunities by providing financial consulting on song catalogs available for sale. Before acquiring a catalog, it is vital that you assess the gross and net income figures received and retained being represented by the seller. Song Catalog Due Diligence ProceduresSome of our song catalog due diligence procedures include:•Financial due diligence procedures in connection with publishing and administration catalog acquisitions, including review of accuracy of representation of Net Publisher's Share•Financial due diligence procedures in connection with record label and/or sound recording rights acquisitions•Research in connection with musical compositions and/or sound recordings to determine uses that may be unknown to a rights holder. This type of research may disclose illegal and/or unreported uses of copyrighted material•Research to determine unknown song publishers and/or unknown song ownership shares in connection with the licensing of musical compositions
Clients
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Our Clients

Benorce Blackmon Artist/ProducerJames Gadson Artist/ProducerKeith Crouch ProducerJaguar Wright ArtistKobayashi ProducerEvans Thompson Artist/Producer/SongwriterDJ Dee Wiz DJ/ProducerRakiem Walker Artist/SongwriterArt Bennet Artist/SongwriterEsther Phillips Estate ArtistGil Scott Heron Poet/Artist/WriterEvchan Publishing Inc.Modal Records LLCNew Jack Swing Productions IncRuffhouse Records IncTwism Records
Case Study
Subject: Manage for Success: Royalty AccountingA colleague recently suggested that I discuss royalty accounting in one of these newsletters, and specifically who receives royalties. So here goes.Royalty accounting at many record labels has become a black art, using not only smoke and mirrors but all kinds of arcane methods not unlike those at an especially scary voodoo rite. The object, of course, is not just to thoroughly confuse the artist or whoever is supposed to be receiving royalties, but to pay out as little as possible.Preparing royalties statements is probably the most complex function of a label’s accounting department. This is due in great part to the convolutions of most recording contracts. Deal are labyrinthine in nature with curlicues of different royalty rates and furbelows of costs that the label considers to be recoupable from the artist. The resulting maze of deal points makes for, at best, a difficult statement to prepare -- even where a label is completely honest and forthright.Because of the intricacies of most deals, in the case where a label may be less than honest there is room for a lot of chicanery. A statement may not, for example, show the actual quantity of royalty units that it knows were sold, it may take unreasonable reserves against returns (not just the contractual percentage,) it may delay reporting of foreign sales, and may take charges against the royalty account beyond those that may be contractually justified.And even where a label is honest with its statements, they’re frequently difficult to read and understand because they’re not laid out clearly and rendered graphically understandable.In fact there’s very little well-written and moderately priced software available that’s been specifically designed to handle royalty accounting. Many labels use a spreadsheet program such as Excel or a relational database such as FileMaker Pro (both programs work on Macs and PCs) to calculate and prepare statements, but no matter which software is used, it’s extremely complicated with much room for honest error, no less for the rendering of dishonest statements.In a case where not much is involved, some labels assume that a royalty recipient won’t spend the money to send in a qualified auditor, and frankly, there aren’t a lot of CPAs knowledgeable in the intricacies of recording industry accounting. Therefore the label may bury untold "errors" when they prepare their statements.Where a lot of money may be involved, an artist, or publisher, or publisher's representative, such as the Harry Fox Agency, may suspect they'll find sufficient accounting errors -- whether honest or not -- to justify the cost of an audit. In fact I remember one former major label CFO who purposely placed easy-to-find errors in royalty files so that an auditor would find them and not other better hidden "adjustments."Who customarily receives royalties?First, there are the artists, who may be an individual, a duo, or a group. The recording agreement, which artists -- or more likely their attorney or manager -- negotiates with a label, will clearly specify circumstances as to how and when the artist will be paid. These negotiations can get quite heated as each party tries to make the best deal possible. Points that are argued the most are royalty percentages, cash advances, recording funds or budgets, escalations, reserves for returns, "free" goods, and what the label may recoup. Such recoupable items are not just the cost of making a recording, but may also include tour support and video costs, if any, as well as independent promotion and/or publicity.Independent producers may also be royalty participants. In such an event the producer's royalty will be deducted from the artist's share, and will commonly be paid out by the label on behalf of the artist. This protects the producer in the event an artist may have already spent the money, or just hasn’t gotten around to paying the producer.Labels frequently license a song or track, or sometimes an entire album, from another label for a compilation, a soundtrack, or a reissue. The licensor of this music will then be a royalty participant according to the terms of the negotiated license. Finally, almost all recordings contain copyrighted works. (A common exception is for classical music written by long-deceased composers.) The publishers (not customarily the writers) are supposed to receive "mechanical" or publisher royalties for each song or copyrighted work. The statutory fee, which is set by Congress, is currently eight cents per song of less than five minutes, or $.0155 per minute (a bit more than one and a half cents.)Most publishers' mechanical licenses state that royalties must be paid on all units "manufactured and sold." Very few labels follow this, however, and pay for units shipped less a reserve for returns, thereby not paying for inventory that may be in the "pipeline" and which was not in fact sold to consumers.Some labels use SoundScan sales as the basis for their statements.Labels customarily render royalty statements to artists, producers, and licensors semi-annually, ninety days after the close of a calendar quarter. Publisher statements, on the other hand, are usually rendered four times a year, forty-five days after the close of a quarter. Where possible you should try to negotiate with your smaller, and possibly more-flexible publishers, that you may render statements semi-annually rather than quarterly, halving the time and cost of preparation for your accounting person or department. This is particularly true in the case of small, artist-owned publishing companies.In any event, I believe it’s in the best interest of labels that they do whatever is possible to render honest and clearly understandable royalty statements. And if you keep your deals simple, it’ll be easier to calculate, and pay, your royalties.* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *Copyright 2002 by Keith Holzman
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