Musicians say unfair contracts punish them

LOS ANGELES -- A group of musicians including Don Henley and Jennifer Warnes urged California lawmakers to intervene and protect them from what they say are unfair contracts that give recording companies the opportunity to withhold royalties with impunity. \nThe musicians, whose careers span seven decades, also charged Tuesday that the recording industry systematically underreported sales to reduce royalty payments. \nContracts are "dishonest," "indecipherable" and "laughably one-sided," said Warnes who, despite selling some 30 million albums since 1968, said she didn't receive her first royalty check until 1991. \nThe musicians said their only recourse is to pay for expensive audits of their labels' finances. But even if they can prove they have been shortchanged, they said, recording companies don't always pay up and most artists have little leverage to make them do so. \n"There's no penalty for negligent underreporting," said Henley of the Eagles. He said the contracts are the same at any major label so "you can't shop around and get a better deal." \nThe Eagles have been conducting audits almost perpetually since 1975, said band member Glenn Frey. \nContracts between a musician and a label stipulate that any failure to pay royalties is not a material breach of contract, said Simon Renshaw, a manger of several music acts with the Beverly Hills-based agency The Firm. \n"It's catch me if you can, and then I'll repay you some of the money I stole from you, and then we'll start again. That's the game. It's institutionalized," Renshaw told a joint hearing of the state Senate Committee on Judiciary and the state Senate Select Committee on the Entertainment Industry. \nHe called for a system that would allow artists to walk away from their contracts if their labels conduct dishonest accounting. \nArtist royalty rates are typically set around 12 percent to 16 percent of sales. But before any of the royalties reach an artist, the company usually covers promotion, production, packaging and other expenses. In addition, the labels withhold large percentages to cover discounts they offer to retailers as well as reserves for any returned goods. \nA senior executive from the five major recording companies categorically denied the charges of dishonest accounting. \nCary Sherman, president of the Recording Industry Association of America, complained the industry faced "trial by anecdote" and lambasted the panel for allowing indiscriminate charges, misleading allegations and innuendo. \nU.S. labels received $60 billion in revenue and foreign licensing fees last year and recorded profits of $5 billion. In comparison, artists received $9 billion in royalty payments, according to a study presented by the industry. \n"We all know there are gray areas in the contracts," said Chuck Ciongoli, senior vice president of Universal Music Group. \nBut artists often use audits as a tactic to renegotiate their contracts, and they neglect to point out they usually receive advance payments, he said.