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Murray urges the record companies to "consider structural and accounting changes on their own to avoid legislative [action] that would mandate contract terms," and to "engage in discussions with State Legislatures and Congress about enacting those suggestions that require legislative action."
CAN’T WE ALL JUST GET ALONG?
Senator Kevin Murray Offers Opinions on How to Better Artist-Label Relations
In an open letter to the music industry on recording industry practices apparently aimed at keeping the industry attention on issues raised at recent hearings, California State Senator Kevin Murray reiterates the conflicts he feels artists and labels need to address, while offering possible solutions to some of these problems.

Murray urges the record companies to "consider structural and accounting changes on their own to avoid legislative [action] that would mandate contract terms," and to "engage in discussions with State Legislatures and Congress about enacting those suggestions that require legislative action."

"Much like the public generally dislikes politicians but love their individual representatives, artists have respect for their record company handlers, but distrust the companies themselves and the system they operate under," Murray writes. "They see themselves as victims of an indentured servitude system designed to keep them perpetually indebted to the companies who also own the product of their labor."

At issue in particular are California’s Seven Year Rule, the exception to that rule obtained by the recording industry (that resulted in the introduction of legislation to repeal the exception) and record company accounting practices.

Likening record companies to Big Tobacco, Murray says, "When confronted by the accusations from auditors that all royalty statements under-reported royalties due to artists, representatives from all five major record conglomerates denied any wrongdoing. I was reminded of tobacco executives standing in front of Congress and swearing that they did not believe tobacco was harmful to one’s health. No matter whom you believe, there is clearly dysfunction in the relationship between artists and record companies."

Murray also questions whether legislation is the way to solve some of these problems. "Such situations provide the possibility of legislatively imposed solutions that make neither [artists nor labels] happy," he says. "Some issues, like the Seven Year Rule and copyright matters, are statutory in nature and must be solved by legislation. Others, like the structure and nature of contracts, are less appropriate, but nevertheless subject to legislative solutions."

When considering issues surrounding recoupment, Murray advises, "Record companies should consider going back to the old practice of separating the personal advance and recording/video/promotion and marketing costs. Contracts should be structured such that the personal advance is recouped against the artist’s royalties, but recording costs under a certain amount, say $250,000, are not recouped. Videos, major marketing and independent promotion costs could be treated the same. This would increase royalty payments to successful artists, but more important, would also encourage artists to be more efficient and would significantly reduce the multi-million dollar, upfront investments made in artists by the company. This, in turn, reduces the record company’s risk, reduces the amounts lost on unsuccessful artists, and increases the record company’s bottom line. This creates a positive atmosphere for everyone involved."

As for faulty royalty accounting, Murray suggests there are two potential solutions that have been proposed to remedy this situation. "One is to legislatively confirm that the duty to pay royalties to a recording artist is a fiduciary duty," he said. "The other is to legislatively create penalties for a pattern and practice of underpayment of royalties. Making the duty to pay royalties a fiduciary duty essentially means that the artist would

have a moral right, in addition to the contractual right, to receive fair and accurate royalty

statements and would have additional remedies available to them to enforce their rights,

including potentially having the contract end.

"A potential solution is to legislatively create a penalty of treble damages for those companies that routinely and systematically have a ‘pattern and practice’ of underreporting royalties," Murray continues. "Such a statute could be drafted to curtail its use in a frivolous manner by artists."

In Murray’s opinion, the suggestions in his letter "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."

"The California Legislature carefully considered Senator Murray’s bill in both houses of the legislature," said Amy Weiss, spokesperson for the RIAA. "The bill was rejected as were our offers of compromise and now he is resorting to typical politics—when you lose on the issue, you resort to mudslinging and name calling."

To read the complete open letter by Sen. Murray, click here.

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