During July of 2004, California enacted a new law, SB 1034, establishing a statutory set of basic recording-contract audit standards. A summary of certain provisions are:

SB 1034, effective Jan. 1, 2005 as Civil Code sections 2500 and 2501, affords recording artists some additional muscle to audit record companies.

SB 1034 Supersedes Contractual Restrictions: Notwithstanding any contractual restrictions to the contrary, SB 1034 affects all recording agreements subject to California law. Further, SB 1034 defines “royalty recipients” in a way that should include and benefit record producers.

Royalty Recipients Get an Annual Right to Audit: SB 1034 entitles recording artists to annually audit record companies. The artist must request an audit within three years after the end of a royalty earnings period, and a particular statement can only be audited once.

The Right to Choose an Auditor Is Significantly Strengthened: SB 1034 lets an artist engage a qualified royalty auditor, regardless of whether that particular auditor is auditing the same record label for other artists. Most recording agreements prohibit this.

Given the finite number of experienced royalty auditors, this provision is an important pro-artist development. This provision entitles the Royalty Review Council to conduct a royalty audit on behalf of more than one artist at a time at the same record label. This will also benefit the artist who can now select their first choice among a limited number of qualified auditors.

The above is a summary of certain aspects of the legislation and does not represent a legal interpretation of the legislation or the particular rights of any parties. Should you have any questions you should seek independent counsel.