RIAA THROWS DOWN THE GAUNTLET

Buckle up, pookie, this could get ugly.

Showing signs of frustration that negotiations for a compromise between the RIAA and the Recording Artists Coalition over the seven-year statute have stalled, the RIAA has made public the compromise provisions already agreed upon between artists and labels.

The RIAA has been engaged in negotiations with artist representatives for the past seven months, and according to the RIAA, the agreement reached involved significant concessions from both sides.

The RIAA says the labels have offered "dramatic concessions in recent negotiations with the artists in an effort to reach an industry agreement to change the so-called ‘seven-year statute.’" The concessions include significant restrictions on the amount of damages labels could seek from an artist who breaks his contract after seven years compared to current law. They would also allow artists, in many cases, to avoid damages by delivering additional albums.

At issue, however, is RAC’s desire to make the compromise retroactive and applicable to existing contracts. According to the RIAA, this was not part of the two parties’ agreement and represents a last-minute attempt by artist representatives to grab as much as they can.

"It’s not fair for two reasons," RIAA Chairman Hilary Rosen. "One is, you invest a significant amount of money in an artist expecting that you’re going to have a relationship with that artist over the course of a term. It’s not fair to change the rules in the middle of the game—if you want to change the rules for next time, do so. And two, I think as a practical matter it’s just bad public policy. We came to the table in good faith, expecting that we were negotiating prospectively, and now there’s an extra grab."

Rosen points out that all along, artist representatives have insisted this debate is not about the superstars of today but new and upcoming artists who, they say, have little leverage to negotiate better deals in the beginning.

"They were saying, ‘We want this not for us but for the new artists. It won’t affect us,’" Rosen said in an interview. "They testified to the fact that this was a prospective thing. But now that there’s a deal, they want it to be retroactive to existing contracts. Advances have been paid, deals have been done, all on a basic set of expectations on both sides. You can’t go back and rewrite that history. They don’t want to give back the advances or change the terms of their deals, they just want to limit their liability if they walk away."

The RIAA says that if the compromise were to be applied retroactively, an artist who signed a six-album deal and received a big advance could conceivably walk away after two albums. Then the record company would be limited to damages on two albums instead of four—regardless of how much had already been invested.

"I don’t know where it is going to go from here," Rosen said. "I’m not sure if all those artists that went to Sacramento testifying and swearing that this wasn’t about them are aware that their representatives are making it be about them. I believe that that wasn’t their intention."

For his part, attorney and RAC representative Jay Cooper takes exception to the RIAA going public at this point. "Unfortunately, they decided to use the press to negotiate," he says. "We are a couple of major issues apart, and I don’t know whether we’ll settle or not."

But wait, there’s more: Regarding the status of Sen. Kevin Murray’s SB 1246, the bill in front of the California legislature proposing to change the seven-year rule, Rosen says the most recent amendment omitted crucial pieces of the compromise puzzle:

"When our agreement broke down last week, Murray introduced a whole new set of provisions, and he sort of cherry-picked some of our agreement and left out other pieces," she continued. "So there’s no point in attacking or analyzing the bill as amended because that’s not even on the table. There’s a pretty strong view that we’re not going to be outvoted, and we have no interest in outvoting them. If people don’t agree, we’re not going to get anywhere. I’m in the place where it seems to me silly for people not to agree."

Murray disagrees with Rosen’s characterization of the legislative process: "It’s just stupid. And it’s not true," he said, noting that his bill’s current amended state is a work in progress. "The bill in its current form doesn’t include everything, because there are things that haven’t been agreed upon by both sides. It’s a mischaracterization that doesn’t do the record companies any good. It will make artists more bitter and it shows members of the legislature that the RIAA is even more disingenuous, especially considering they left the committee hearing early."

Rosen also had a few choice words for attorney Don Engel’s position on "tacking" (see story, 8/6):

"I’m offended by his comments because the only person that his view helps is himself—the lawyers," she offered. "The artists’ entire argument was that litigation is costly, it’s disruptive to their careers and the record companies outgun them on finances, so they don’t want litigation. And here, what Don Engel is saying is, ‘Let’s leave it vague so we can keep litigating this stuff.’ It makes no sense.

"Everybody wants certainty here, and I think one of the benefits in moving forward is that if there is certainty in what the law is, then it’s all about the business deal," she said. "I just think it’s offensive that his solution is, ‘Don’t clarify the law, don’t create certainty for everybody, don’t level the playing field; let’s keep what I think is leverage and let’s keep litigating.’"

"The record companies think he’s just wrong. He thinks the seven-year statute [as it currently stands] would trump the damages provision; but in fact it specifically says that the damages provision trumps the seven years in the statute and that was the intent of the legislature in 1987."

Is the olive branch cracking? Are the gloves coming off? Will Peter finally confess his love to Jan? Stay tuned.