The Future of Music Coalition (FMC) joins the Recording Artists’
Coalition (RAC), AFTRA and AFM in supporting State Senator Kevin Murray’s
efforts to convene today’s joint hearing of the California Senate
Judiciary Committee and the Select Committee on the Entertainment Industry
in order to investigate the record industry’s accounting practices.
Any serious examination of these practices must consider the fact that
the music industry in America is fundamentally broken. In 1999, less than
1 percent of the total number of albums released sold more than 10,000
copies (1), this in a world where any record selling
less than 500,000 copies is considered a commercial failure. Commercial
radio airplay is often sold to the highest bidder through a shadowy network
of “independent radio promoters.” (2) The
dreams of stardom chased by many are met head on with the sad reality
that an estimated 75 percent of releases on major labels are not even
currently in print, leaving artists with a huge debt to the record companies
for which they have no means to pay back and prohibiting consumers from
ever purchasing works they may wish to own.
One crucial mechanism that establishes and props up the legal framework
of this failed model is the major label contract. The standard 60-plus
page contract is a monument to legalese, intentionally designed to be
obtuse, if not inscrutable. Many artists that sign these contracts, even
with the best possible counsel, enter long-term deals that leave them
vulnerable to egregious exploitation by the major label system.
Many entertainment attorneys would agree that there are clauses in the
standard industry contract that are completely unilateral and absolutely
non-negotiable. Emerging artists are often presented with a “take-it-or-leave-it”
scenario when they sign to one of the five major record labels, leaving
them little or no room to contest specific clauses. Established, successful
artists can use their leverage to negotiate better deals on subsequent
contracts, but many clauses in the initial contracts make it difficult
for artists – even the successful ones – to know even the most
basic information about their position in the contracted arrangement.
Many of these clauses involve artists’ access to proper and complete
accounting records generated by their label.
For the purposes of today’s hearing we will highlight an example
of a clause in major label contracts that relate to accounting:
Auditing By The Artist Clause
A typical "auditing by the artist" clause reads:
Company will maintain books and records which report the sales of Phonograph
Records, on which royalties are payable to you. You may, but not more
than once a year, examine those books and records… You may make
those examinations only for the purpose of verifying the accuracy of
the statements sent to you under paragraph 10.01…You may make
such an examination for a particular statement only once, and only within
one (1) year after the date when Company is required to send you that
statement under paragraph 10.01… You will be required to notify
Company at least thirty (30) days before the date when you plan to begin
it. Company may postpone the commencement of your examination by notice
given to you not later than five (5) days before the commencement date
specified in your notice; if Company does so, the running of the time
within which the examination may be made will be suspended during the
postponement. If your examination has not been completed within one
(1) month from the time you begin it, Company may require you to terminate
it on seven (7) days' notice to you at any time; Company will not be
required to permit you to continue the examination after the end of
that seven (7) day period…You will not be entitled to examine
any manufacturing records or any other records that do not specifically
report sales or other distributions of Phonograph Records on which royalties
are payable to you. [emphasis added]
An artist’s royalties are calculated, and certain deductions are
made from those royalties, based on the amount of CDs the company has
manufactured. Such calculations are beyond the scope of this document.
However, if an artist chooses to investigate the validity of his/her royalty
payments and deductions, the actual number of CDs manufactured is not
verifiable by the artist. This would be the equivalent of the IRS auditing
a corporation, but only checking the accuracy of the calculations themselves
and not the actual underlying profits and revenues the calculations are
based on, which really isn’t an audit at all.
Moreover, there is no audit right applicable to major label foreign affiliates,
and no specific obligation to require the foreign affiliates to pay royalties
to the U.S. company, which also causes a major financial impact on artists.
Thus, an artist is left with no real way of knowing how many records were
manufactured, which is crucial to determining what royalties may actually
be due, or how much should be deducted from his/her royalty payments with
respect to the excess manufacturing cost clause cited above. The artist
is forced to take the label’s word on faith.
This is only one example of the clauses in the standard industry contract
and the effects they have on the livelihood of recording artists, but
there are many more. In September 2001, Future of Music Coalition attempted
to cut through the confusing language by crafting a major label contract
critique, which translated the most onerous and confusing contract clauses
into plain English and paired them with easy-to-understand critiques written
by practicing entertainment attorneys. The contract critique is available
on our website at:
We hope this document can be used as a tool to by even those who are
completely unfamiliar with the music business can better understand the
dangers of signing a standard major label contract, and encourage the
dialogue that is beginning to emerge from a better-educated public.
Notes
1. David Segal, “They Sell Songs the Whole World Sings: Mass Merchants
Offer Convenience, Less Choice,” Washington Post, February
21, 2001, Page A1.
2. Eric Boehlert “Pay for Play,” Salon, March 14, 2001.
Musicians Get the Hint About Health Insurance
Two Raleigh concerts in memory of musician Drew Glackin; proceeds go to Glackin’s family and Future of Music Coalition’s Health Insurance Navigation Tool
April 10, 2008 Press release FMC's HINT program
New York State Music Education Events Examine Crucial Issues Facing Artists Forums in Rochester (April 28), Syracuse (April 29) and Albany (April 30) to focus on music, media, technology and policy issues for songwriters, composers and performers from all genres.
March 25, 2008 Event details | RSVP
Pop Rockers OK Go "Tour" Congress in Support of Net Neutrality
Damian Kulash and Andy Ross discuss the importance of open Internet structures to musicians; Kulash testifies before House Judiciary Committee.
March 13, 2008 Press release
Spoken testimony
Written testimony
Rock the Net
New York State Music Education Events Examine Crucial Issues Facing Artists Kick-off forum in Buffalo on April 2 to focus on music, media, technology and policy issues for songwriters, composers and performers from all genres. March 7, 2008 | Event details
Philly Bands Rocking for Net Neutrality February 23 Sugar Town show at Tritone in Philadelphia will showcase lady rockers and DJs, as well as musicians' support for net neutrality. February 15, 2008
OK Go and Bonerama Rocked DC for New Orleans Musicians Bands also champion FMC's "Rock the Net" campaign for net neutrality February 2 benefit show at DC's 9:30 Club raised over $8,000 for New Orleans musicians. Bands played cuts off their new benefit EP, You're Not Alone, available on iTunes on February 5. February 4, 2008
Upcoming Washington, DC show and benefit EP from OK Go & Bonerama
On February 2, OK Go and Bonerama will play a benefit at D.C.'s 9:30 Club in support of You're Not Alone - an EP to support Sweet Home New Orleans and Al "Carnival Time" Johnson. January 21, 2008
Successful New Orleans Concerts Aid Big Easy Musicians
Last week, two benefit concerts raised over $6,000 for Sweet Home New Orleans - a coalition of non-profit organizations that helps find affordable housing and provides rental assistance for the city's musicians - and Big Easy music legend Al "Carnival Time" Johnson.
January 15, 2008 Press release | Event details
Ann Chaitovitz Appointed
FMC's New Executive Director A proven leader in musician and public policy issues, Chaitovitz replaces founding Executive Director Jenny Toomey January 3, 2008
Concerts for New Orleans Musicians Bring Artists Together Two New Orleans shows and upcoming benefit CD from OK Go and Bonerama January 2, 2008
FMC's Jenny Toomey Appointed Program Officer for Ford Foundation
Kristin Thomson to Serve as FMC’s Interim Executive Director Michael Bracy to Chair FMC Board of Directors November 26, 2007
Seattle "Rocked the Net" Rep. Jay Inslee advocated network neutrality;
joined by rocker Matt Nathanson, Reclaim the Media, FMC and local music business representatives October 31, 2007
Rock the Net: Campaign for Net Neutrality Rocks Seattle
Teleconference with Rep Jay Inslee on Tuesday, Oct 30. Matt Nathanson performs at Seattle’s Crocodile Café on Tuesday, Oct. 30 October 26, 2007
Future of Music Policy Summit to Tackle Critical Issues at the Intersection of Music, Law, Technology and Policy Sen. Byron Dorgan and Sen. Ron Wyden to Deliver Keynote Addresses
Mac McCaughan, Bob Mould, Marybeth Peters of the U.S. Copyright Office and More Than 90 Other Panelists Confirmed. September 10, 2007 Summit home page Press Credentialing
AT&T's muting of bands points toward a pattern of silencing political speech Content monitor did not edit out 20 instances of curse words during Pearl Jam webcast, despite AT&T claim it hires monitors to block "excessive profanity". August 13, 2007
Top musicians, lawyers, technologists confirmed for FMC's 7th annual Policy Summit August 13, 2007 Press Release Summit home page Press Credentialing
FMC Statement on AT&T Silencing Pearl Jam's lyrics during Lollapalooza webcast August 9, 2007
FMC Statement on Federal Trade Commission Report on Net Neutrality June 29, 2007
FMC files testimony with House Small Business Committee on CRB Webcasting Rates June 27, 2007 Press Release | Testimony
Clear Channel strips local, independent artists of digital performance royalties
FMC has discovered that Clear Channel's online application for local and independent artists to submit their music for airplay on each of its stations requires the artist to approve a licensing agreement that does away with their digital performance right. June 22, 2007
Low Power Radio Gets New Push in Congress
Congress introduces bills to create hundreds of new low power FM radio stations to cities and suburbs across the country. June 22, 2007
FMC Announces Dates for 7th annual Policy Summit
September 17-18, 2007
GWU Betts Theatre, Washington, DC June 11, 2007
FMC Organizes "Musicians Bringing Musicians Home II"
A Benefit Concert on May 27 at New Orleans' Tipitina's for Sweet Home New Orleans featuring: Indigo Girls, Damian Kulash of OK Go, Jim James of My Morning Jacket, Matt Nathanson, Pamela Z...and special guests
May 23, 2007 Press Release | Details
Congressman Mike Doyle to address conference on music, law and technology
May 2 event will bring together leading experts from worlds of music, law, technology and policy. April 25, 2007
A2IM Endorses Rock the Net Campaign
American Association of Independent Music urges its label members to join the campaign for network neutrality. April 17, 2007
Music Mashes with Policy at upcoming Technology and IP Policy Day
May 2 event will bring together leading experts from worlds of music, law, technology and policy. April 16, 2007
FMC Applauds FCC's Payola Settlement
Payola agreement by FCC and big broadcast chains represents a major - but tentative - step toward once again opening the nation's airwaves to local music and voices. April 13, 2007
Rep. Edward Markey, Ted Leo kick off "Rock the Net"
Nearly 150 artists and labels have already signed onto campaign for net neutrality
March 27, 2007 Press Release | Rock the Net
Major Artists To Join Launch of Rock the Net Campaign for Net Neutrality March 23, 2007
FMC Statement on FCC's "Rules of Engagement" On Payola March 5, 2007
FMC Files Reply Comments in FCC Media Ownership Proceeding January 16, 2007
FMC Statement on FCC Payola Settlement
FMC's statement on FCC's reported consent decree with the broadcast industry in regards to payola. January 16, 2007
Radio Station Ownership Consolidation Shown to Harm Musicians and the Public
FMC study shows that the rapid consolidation of the commercial radio industry that followed the Telecommunications Act of 1996 has led to a loss of localism, less competition, fewer viewpoints and less diversity in radio programming in media markets across the country.
December 13, 2006 Press release Report details
FMC Organizes Musicians Bringing Musicians Home Benefit concert at New Orleans' Tipitina's on November 6th featuring Steve Earle, Mike Mills, Allison Moorer, Tom Morello, Boots Riley, Corin Tucker and special guests.
October 23, 2006 Read press release Read press coverage
Job
Losses Associated with Radio Consolidation Undermine Localism and Diversity FMC, Newspaper Guild and Consumers Union urge FCC to take employment effects
of their policies into account during upcoming review of media ownership rules August 9, 2006
FMC Releases Research on Employment and Wage Effects of Radio Consolidaton August 9, 2006
FMC on Preserving the Dynamism of the Internet Opinion Piece on ABC News June 29, 2006
FMC Statement on Senate Commerce Committee Vote in Support of LPFM June 28, 2006
FMC Statement on FCC Media Ownership Proceeding June 21, 2006
Indie-rock revolution, fueled by net neutrality Op-ed by FMC's Jenny Toomey and Michael Bracy June 13, 2006
Pearl Jam Donation To Help Musicians Help Themselves Proceeds From Washington, DC Appearance to be Donated to FMC Artist Research
Council May 25, 2006 Press Release
FMC signs on letter to preserve net neutrality May 17, 2006
FMC Announces Dates for Sixth Annual Future of Music Policy Summit
October 5-7, 2006 Media Advisory May 15, 2006
FMC Statement on Release of Feingold's Radio and Concert Disclosure
and Competition Act of 2005 November 18, 2005
FMC Sends Letter to Senate Commerce Committee in Support of a
Public Performance Right for Sound Recordings October 19, 2005
Top Names in Music, Law, Technology and Policy Return to Debate Critical
Issues at Fifth Annual Future of Music Policy Summit
September 6, 2005 Media Advisory | Policy
Summit home page
FMC Announces Health Insurance Navigation Tool
August 9, 2005 HINT Home Page
FMC Press Release: Music Mashes with Policy at DC Policy Day April 8, 2005
FMC's Michael Bracy Testifies in front
of House Judiciary Committee on "Digital Music Interoperability" April 6, 2005
FMC files comments at US Copyright Office on "Orphan
Works"
Comments also ask Copyright
Office to consider status of out-of-print recordings March 25, 2005
FMC Sends Letter to Senate Stating Concerns about S 193, Broadcast Decency Enforcement
Act March
10, 2005
FMC and artist groups file joint reply comments at FCC on localism in broadcasting,
MB Docket 04-233
January
3, 2005 PDF of document
