The campaign by California state senators Martha Escutia and Kevin Murray on the accounting practices on US record labels, which they claim leaves artists underchanged, continued with a second hearing in LA yesterday. Don Henley, Glenn Frey, and Joe Walsh of the Eagles, the Dixie Chicks' Martie Maguire, Kevin Richardson and Howie Dorough of Backstreet Boys, Jennifer Warnes, Tom Waits, Kathryn Crosby (who represents the Bing Crosby estate) and Ray Parker Jr were among the artists stating their case, while senior record industry players including 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 were also present.
The artists believe that record labels use complicated accounting procedures to cover up the underpayment of royalties to artists. So much so it has become the industry norm for large artists to audit record companies to work out how much more they are owed – leaving the artist community convinced smaller acts who can’t afford an audit are missing out. At an initial hearing in July the RIAA said they needed more time to respond to such serious allegations.
At the hub of the debate is why record labels are not more accurately paying royalty fees – and whether underpayments are deliberate or due to incompetence. Of particilar concern is the fact many recording contracts say that if an artist believes they are being underpayed a label only has to respond if an audit proves this to be the case, and then they only have to pay the unpaid royalties. Murray is suggesting that if rules were set up that fined labels shown to underpay artists then they would set up more rigorous accounting practices to start with.