RIAA, labels begin battle over artists' contracts

Offering the first comprehensive look at a debate that could change the shape of the record biz, the Recording Industry Assn. of America complained Wednesday that efforts to reach a compromise with artists about California’s seven-year law hit a wall over a bid to make the proposed changes retroactive.

Such a move, they said, could wreak havoc with current contracts, letting artists walk away from their obligations and costing the labels millions in lost revenue. It also could wipe out major progress made on several other points of contention, the org asserted.

“I’m baffled by this,” RIAA topper Hilary Rosen said. “You’re talking about business relationships and contracts that have been negotiated on the understanding of existing laws; to change all that around now is completely unfair.”

At issue is a 1987 amendment to California’s seven-year limit on service contracts, permitting labels to sue artists for undelivered albums on their contracts, even after seven years have passed. A bill proffered by state Sen. Kevin Murray (D-Culver City) that would end that exception has kicked up a storm of controversy inside the industry.

The RIAA and artists’ reps (led by the Recording Artists’ Coalition) have been negotiating for the past several months in an effort to reach a middle ground, and the association said they have made significant progress.

‘Tacking’ it together

According to the RIAA, the parties have agreed that an artist’s seven-year limit can be reset during his or her contract, provided the artist agrees to the change (also known in the biz as the “tacking” issue).

Agreement also reduces the amount of damages a label can recoup after the seven-year limit is up (to as little as zero, depending on how many albums an artist has delivered) and gives an act the option of delivering the required albums before being sued.

On the label side, the deal would require artists to pay back advances and other moneys paid for albums undelivered after seven years. It also provides a way for an artist to give a label due notice before ankling a deal under the seven-year statute.

Finally, the tentative agreement permits “any party to a recording contract” to sue for breaches, provided the artist has not yet given proper notice. If notice is given while a suit is pending, the label can still continue with its action, as well as seek damages for undelivered albums or waive that right if an artist offers to deliver the remaining records.

Going public

But Rosen said the proposal to make all these terms retroactive came in the 11th hour of a protracted debate. She argued that the demand is hypocritical, given that artists have contended the current debate is for the benefit of young acts, not established stars.

RAC attorney Jay Cooper declined to comment on the details of the negotiations but expressed disappointment that the RIAA chose to air its concerns with specific points in public.

“These are intertwining issues,” Cooper said. “You can’t isolate one little thing and take it apart like this.”

Online royalty rates

Separately, the RIAA said Tuesday it would file a Washington, D.C., Circuit Court appeal of a decision by Librarian of Congress James Billington on royalty rates for online broadcasting.

The org plans to argue that Billington didn’t adequately consider as precedent 140 licensing agreements that the industry had signed with Webcasters prior to his decision.

Billington set the rate at 0.07¢ per song streamed on the Net, both for online-only Webcasters and for terrestrial broadcasters that duplicate their signal in cyberspace. The rates met with widespread derision on both sides: Webcasters said the rates were far too high for small operators to cover, and labels complained they didn’t reflect the full value of the music.

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