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Record Companies Say Past Contracts Fair Deals

Major record companies, seeking to quash a brewing revolt by pop stars over royalty payments, on Tuesday released a study backing its claim that the embattled industry has negotiated past contracts fairly.

The release of the study, commissioned by the Recording Industry Association of America, came as lawyers for musicians told a California state Senate hearing in Sacramento that the record industry has used faulty accounting to cheat them out of royalties.

To bolster its claim that the record business is on the up and up, the RIAA released a study by Michigan State University professor Steven Wildman showing that recording contracts have reflected terms agreed to by all parties.

The RIAA is a trade group for the big five labels, including Bertelsmann AG BMG, EMI Group Plc, AOL Time Warner Inc,Vivendi Universal and Sony Corp.

The study, an analysis of over 500 recording contracts between artists and the five major labels between 1994 and 2000, found that in all but one of the cases, artists were represented in their negotiations with record labels by lawyers.

The study also found that deals renegotiated after hit albums tended to be more financially rewarding to artists, evidence, the record industry said, that showed it has shared the wealth with its hit-makers.

“A glaring misimpression exists that record labels are high profit, low risk companies uninterested in paying artists their fair share,” said Steven Marks, senior vice president, legal affairs for the RIAA, said in testimony before the state senate panel on Tuesday.


“That’s simply not reality. It is no accident that many of the higher-profile accounting and other financial disputes that have arisen over the years have been resolved with new contracts, not a parting of the ways,” he said.

Meanwhile, musicians’ representatives, including Londell McMillan, legal counsel to the Artist Empowerment Coalition, that includes such artists as Stevie Wonder, Faith Evans and Roberta Flack, argued that record labels routinely underpay royalties and tie artists to unfair contracts.

Recording artists Sam Moore, the veteran soul singer of the 1960s, and rapper Montell Jordan were also at the Sacramento hearing, according to people who attended.

The hearings were called by California Senate Judiciary Committee chairman Martha Escutia, and Senator Kevin Murray, who has authored a bill to repeal an amendment to the California labor code that allows labels enter into lengthier contracts than other sectors.

Artists have decried that legal loophole as well as industry accounting practices, which they say are used to cheat them out of royalties.

McMillan, who also represented Prince in his battle to break his contract with Warner Brothers Records, could not be reached for comment.

But other entertainment industry veterans said the hearing was long overdue.

“Record company accounting is a subject that needs to be discussed and dealt with. I don’t think it stems from any criminal intent at all, but let’s say that every time you take an audit of a record company’s books, you find money due,” said Jay Cooper, an entertainment lawyer in Los Angeles.

“I’ve always been successful at settling these royalty disputes without litigation,” he said. “Obviously these contracts are subject to interpretation and the labels will take the interpretation that best favors them,” he said.

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