Writers represented within the ICE Core have been the first to benefit from a dedicated Audit & Assurance function, with the first DSP audit recently completed.
So, what is involved in Audit & Assurance and why should rightsholders care?
The audit process
When people think of audits, it brings to mind teams of accountants descending on offices, but the reality is that there’s much more work behind a modern DSP audit than just the field auditing.
A range of resources are utilised, combining both in-house expertise and specialist external parties.
ICE selects these external parties through a rigorous tender process to ensure proven capabilities in the area and the best value for money.
This focus on the commercial benefit for writers is also a key guide in assessing which DSPs to audit and when.
What’s the return on the investment? What are the risk factors? Are there known issues? What level of royalties are being processed?
All of these are considered in the detailed planning stage and act as a guide to determine priorities.
Rather than deploy a one-size-fits-all approach, ICE uses its extensive experience working across a wide range of DSPs to assess the best initial steps.
It may be that the process starts with controls assurance – verifying that the DSP has the relevant controls in place to create accurate usage reports and to prevent/identify any potential under-reporting.
Based on the outcomes of this, a wider royalty audit process may follow, where any sums from inaccurate reporting are identified and quantified.
Alternatively, the initial DSP assessment may highlight that a full royalty audit would be suitable, so audit activity would encompass both controls assurance and royalty auditing elements from the outset.
Depending on the audit results, there are a range of gains for rightsholders.
The first, clear, benefit for creators is additional royalties. The recent DSP audit that ICE conducted directly brought additional royalties into the ICE Core from identified reporting shortfalls.
Furthermore, remedial actions identified as part of the audit will benefit future royalty flows, by ensuring more robust standards and more sound practices by the companies at the consumption stage. Creators have more certainty that they will be rewarded for the utilisation of their works on these platforms.
The engagement and collaboration with DSPs also facilitates continuous improvement, where best practice and key learnings are shared, supporting a more sustainable system.
It’s worth reinforcing the positive impact for DSPs – platforms can benefit from audit findings as it provides an opportunity to improve the way they work and potentially identify areas of loss for themselves.
As platforms utilising music continue to develop and new ones emerge, it’s important that representatives continue to act in the best interests of rightsholders by going ‘under the bonnet’ on their behalf.