NEW YORK — The accounting practices of the major record labels came under intense scrutiny Tuesday as a cavalcade of rock stars aired their grievances during a hearing convened in Los Angeles by the Judiciary Committee of the California Senate.
Members of the Eagles, Kevin Richardson of the Backstreet Boys and solo artist Clint Black were among those on hand to decry what they say is systematic underreporting of royalties by the labels, resulting in millions of dollars of artists’ revenues lost.
“The general consensus of artists that I’ve come into contact with is that there’s not a lot of faith in the record industry’s accounting practices,” said Richardson in an interview between sessions. “You do an audit and it turns out that 95 percent of the time the record company has made a mistake and they do owe money.”
Contemporary pop artist Jennifer Warnes added that many artists are forced to rely on recording advances alone, since they rarely see royalties even on successful records.
No royalty payments
“Despite the fact that my first six major-label solo albums have sold handsomely . . . according to my royalty statements, all of these albums are still unrecouped,” she said in prepared testimony.
However, label reps also turned out in force on Tuesday to argue that they take great pains to make sure their royalty calculations are as accurate as possible, and that most reporting discrepancies are either simple errors or questions of contract interpretation.
“We have developed and are continually improving a world-class and comprehensive royalty reporting system, in which we have invested millions of dollars, to ensure that our artists are compensated according to their contracts,” said Capitol Records senior VP John Ray in testimony. “We are proud of this system and stand by it 100 percent.”
Several label execs asserted that audit settlements represented a minute fraction of total royalties paid out to artists (RCA Records senior VP Jeff Walker put the number at “less than 1%”), and argue that claims of rampant fraud have been blown out of all proportion.
Sony Music exec veepee Thomas Tyrrell added that audit claims are often inflated — in part because auditing firms go for the biggest number they can reasonably claim to gain leverage in negotiations, but also because labels settle disputes quickly to avoid legal expenses and bad blood with artists.
The day of testimony — spearheaded by Sen. Kevin Murray (D-Culver City) and Judiciary Committee chair Sen. Martha Escutia (D-Montebello) — was also scheduled to include a detailed breakdown of royalty audits prepared for the Eagles and the estate of Bing Crosby, whose widow Katherine was among those to testify earlier in the day.
Hoping for new laws
The Backstreet Boys’ Richardson said he hoped that Tuesday’s hearings would result in the enactment of more concrete penalties for labels that are found to have underreported artists’ royalties. As the situation stands currently, “There’s no cost for the company to pay,” he said. “at the worst, they only have to pay you what they already owe you.”
Sen. Murray came to the forefront of the ongoing debate over artists’ rights this year, when he introduced a bill that would have closed a loophole in California law exempting recording artists from the state’s seven-year limit on service contracts.
The bill, which was backed by Eagles frontman Don Henley and his org the Recording Artists’ Coalition, got shelved earlier in the summer amid fierce opposition from the Recording Industry Association of America. But Murray, a former tenpercenter, has remained in the record-industry limelight, holding his first hearing on label accounting practices last July.
One prominent artists’ rights campaigner — singer Courtney Love — was absent from the proceedings. According to published reports, Love told shock-jock Howard Stern last week that she was about to settle her long-running contract dispute with Universal Music Group. The volatile artist had made several appearances at previous Senate hearings, arguing often that the major-label contract system amounts to indentured servitude.