Audit

Cumulus Media, Emmis Communications, Pandora Media, and Urban One are among the companies that Jesse Feder, the Chief Copyright Royalty Judge, has said SoundExchange plans to audit to determine whether each paid the correct amount of royalties for their online webcasts during the years 2017, 2018 and 2019. A public notice in the Federal Register said the companies were informed of SoundExchange’s plan on Dec 18, 2020.

It was not only radio that was targeted for the audits. SoundExchange also plans to audit other users including the cable TV music service Music Choice, the social networking site IMVU, and the business-focused background music service Rockbot.

Under federal law, SoundExchange is permitted to audit a company for any, or all, of the prior three calendar years in order to verify royalty payments. The only requirement is SoundExchange must first file with the Judges a notice of intent to audit a licensee and deliver the notice to the licensee. Although the collection agent for the music companies is required to reveal which companies it is auditing, the law does not force SoundExchange to make public the audit’s findings. That includes which, if any, companies failed to pay all the royalties required for their digital music use. Broadcast attorneys say that if a service under audit is found to have underpaid their royalties by more than 10%, the company will not only be required to pay late fees, but will also be required to pick up the tab for the cost of the audit.

Further adding to the lack of transparency in the process, SoundExchange has never identified how it selects which companies are audited. It has typically focused on the largest radio groups where a shortcoming would deliver the most money.