Artists On Hand For Royalties Accounting Hearing

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Date: Sep 24, 2002
Source: Hollywood Reporter
Submitted By: jmw

Lawmakers, artists, and record company executives will attend a hearing in downtown Los Angeles today (Sept. 24) called by California state senators Martha Escutia (D-Norwalk) and Kevin Murray (D-Culver City), to investigate record label accounting practices. Scheduled to testify on behalf of the artists are Don Henley, Glenn Frey, and Joe Walsh of the Eagles, Clint Black, the Dixie Chicks' Martie Maguire, Kevin Richardson and Howie Dorough of Backstreet Boys, Tom Waits, Kathryn Crosby (who represents the Bing Crosby estate), Jennifer Warnes, Kim Weston, and Ray Parker Jr.

Accountants, auditors, artists managers, and attorneys also will be on hand to outline the complicated accounting of artist royalties. Representatives from the big five label groups will include Jeff Walker, senior VP business and legal affairs at RCA; Tom Tyrell, executive VP external and governmental affairs at Sony Music; Charles Ciongoli, senior VP finance at Universal Music Group; John Ray, senior VP business and legal affairs at Capitol Records; Paul Robinson, senior VP and deputy general counsel at Warner Music Group; and Recording Industry Association of America (RIAA) president Cary Sherman.

This marks the second hearing to look into alleged underpayment of artist royalties by record labels. Artist representatives claim that as a result of underpayments, it has become the "industry standard" for artists to audit record companies to ascertain how much they are owed -- a legal luxury only top-selling artists can afford, leaving many midlevel acts without any means of being properly compensated.

In the aftermath of the first hearing in July, an uproar erupted between the RIAA and state legislators. The RIAA claimed that it did not have enough time to respond to such serious allegations as fraudulent accounting of artist royalties and secret record club contracts. This claim spurred Escutia to send the recording industry a terse letter saying she was "stunned" that their representatives forfeited their allocated time to rebut in order to catch planes.

Both sides promised that everyone will have enough time during today's hearing.

Murray said the focus will be on the auditing process and why artists are put into a position where they have to audit in order to be properly paid and not on whether or not record contracts are fair.

Additionally, during the hearing a special panel will break down the royalty earnings statements and audit reports of Bing Crosby and the Eagles. Both have been involved in lengthy litigation with their respective record labels.

Murray noted that the fine print of recording contracts requires a label to pay an artist what is owed only if the label is found at fault in an audit, and he suggested that legislating a penalty might prompt the adoption of more rigorous accounting practices.

-- Tamara Conniff, The Hollywood Reporter

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