Change royalty structure or gov’t may step in to implement reforms: California report

After three lengthy hearings, the California Senate Select Committee on the Entertainment Industry has issued its report on, among other things, reforms to the accounting practices of recording companies (CNM, Nov. 28/02). In the report, Senator Kevin Murray, committee chair, proposes that if the industry won't undertake changes on its own, government may step in with legislation. Following is the conclusion to that report. The full report can be found here. The suggestions in this report would help solve many of the problems that exist between artist and record company. This would create a mutually beneficial atmosphere of trust that would create a strong industry to fight mutual enemies like illegal downloading. I urge the record companies to consider the structural and accounting changes on their own to avoid legislation that would mandate contract terms and to engage in discussions with State Legislatures and Congress about enacting those suggestions that require legislative action.It should be noted that BMG recently announced a streamlining of its royalty accounting system. BMG's announcement was, however, almost overshadowed by the conspicuous lack of interest by the other major record companies in following suit. BMG should be applauded for a move in the right direction. It remains to be seen, however, whether the new BMG contracts will really be an improvement for artists. Even if the royalty process is streamlined, without changes in the audit restrictions, the changes will ring hollow. As this report was being prepared, an internal memo from UMG, the largest of the big five record companies surfaced which indicated intent on the part of UMG to both streamline royalties and eliminate audit restrictions. It was further reported that the impetus for such change was our State Senate hearings. The company has not yet affirmatively announced that it would implement those suggestions. However, assuming that it implements the memo, it would be a significant recognition by the largest company of the need to foster trust in their artists by making transparency a priority. Of concern in the BMG announcement is their stated interest in participating in "additional revenue streams". An example of this new trend is the recently reported Robbie Williams contract with EMI, wherein they will participate in revenue streams other than records like music publishing, concerts and merchandising. While each artist and record company are free to make whatever arrangement they wish, it should be clear that artists should not have to sell interests in additional revenue streams in order to get the industry to provide fair and transparent contracts. This industry should not revert back to the old practice of demanding interests in the artist's management, publishing and merchandising as a condition of obtaining a record contract. That would truly be a backward move toward indentured servitude. Artists and record companies have so many interests where their interests are aligned. These include: Consolidation in the Radio Industry Independent Promotion Costs Public Performance Royalty for Broadcast Radio Play Extension of the Copyright Term Payments for Internet Streaming by Small Webcasters Protection of the First Amendment Rights of Music Artists Protections against Piracy and Illegal Downloading Creation of New Business Models for Internet Distribution After clearing up their conflicts, artists and record labels can work together to improve the industry for all concerned.

Change royalty structure or gov’t may step in to implement reforms: California report

Broadcast | December 11, 2002

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