We have worked with independent production companies, broadcasters and content providers (TV and music) in reviewing the reporting of profit participation and distribution of licensed content through broadcast, DVD distribution and new media. Our experience has shown that the royalties and residuals payable by the licensee / broadcasters are typically impacted by the licensees’ interpretation and application of key terms and definitions set out in the license agreement that only come to light as a result of an audit. Examples of these include:  

• Definition of “net” revenues and how this has been derived from “gross” sales price;  

• Incorrect deduction of expenditure and application of accounting provisions and not actual expenses;

• Distribution via third party sub-licensees;  

• Incorrect application of royalty rates by distribution channel / territory;  

• Sales outside of the contractual territory;  

• Incorrect off-setting against the upfront production investment and advances;

• Incorrect application of royalty rates on escalated sales volumes:

• Late reporting and payment of royalties and profit share due;

• Other reporting discrepancies due to clerical errors and incorrect product set-up resulting on inaccurate reporting.