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"There is no fiduciary respon-sibility on the part of the labels to the artist. It’s a shell game. It’s catch me if you can, and if you do, we’ll negotiate how much of your money we’ve already stolen you’ll get back."
——Simon Renshaw
NO ACCOUNTING FOR ACCOUNTING
Artists, Labels Reps Throw Down Downtown
Arthur Andersen ain’t got nothing on these guys.

Lawmakers, artists, artist managers and record company executives turned out in force in downtown Los Angeles Tuesday to attend a second hearing on record-label accounting practices.

Eagles Don Henley and Glenn Frey, Clint Black, Backstreet Boy Kevin Richardson, Bing Crosby’s wife Kathryn, Jennifer Warnes, Steve Vai, Ruben Blades and The Firm's Simon Renshaw were among the artists and artist reps testifying at the hearing, called by California Sens. Martha Escutia, who was not in attendance, and Kevin Murray.

Business and legal reps from the Big Five in attendance included RCA’s Jeff Walker, Sony’s Tom Tyrell, UMG’s Charles Ciongoli, Capitol’s John Ray, WMG’s Paul Robinson. RIAA President Cary Sherman was also present.

The proceedings focused on alleged underpayment of royalties, beginning with a panel of artists and reps who regaled the senators with tales of woe and various alleged label misdeeds. The panel pulled no punches when it came to characterizing the way labels do business. Indeed, Blades, representing what he called the "bi-lingual ripoff," went so far as to say, "My first contract was with Morris Levy and Roulette. How come, 43 years later, it’s still the same for me?"

Ouch.

"How come guys who can’t play a note live like kings, but when one of our guys dies, we have to pass the hat to bury him?"

Yikes.

Manager Renshaw explained the problem this way: "Over 20 years both here and in Europe, the one consistent complaint among my clients is that royalty statements are always wrong, if not unintelligible. This is about deliberate attempts on the part of record labels not to live up to their contracts. There is no fiduciary responsibility on the part of the labels to the artist. It’s a shell game. It’s catch me if you can, and if you do, we’ll negotiate how much of your money we’ve already stolen you’ll get back."

Holy Enron, Batman!

After a brief, calming interlude of soothing CPA testimony, it was the labels’ turn.

While emphasizing that the business practices of record companies are not all alike, the RIAA’s Sherman pointed out, "One thing we all share is a sense of outrage at the indiscriminate nature of the allegations leveled at our industry."

Having gotten the party started, Sherman went on to decry the "trial by anecdote" atmosphere of the proceedings before announcing an economic study the RIAA commissioned to examine how money flows into and out of labels. This study maintains that from 1991-2001, U.S. record labels generated a total of $59 billion in revenue, resulting in a profit of $5 billion, or 9%, while artist income over the same period amounted to $10 billion, or 17%.

"The artists in our industry do significantly better than the labels in our industry," Sherman asserted. "The modern record industry bears little relation to the out-of-date perceptions that may explain much of the mythology about royalty reporting."

UMG’s Ciongoli added: "Our contracts are meant to cover the business as we know it today. The industry is fluid, and because of that our contracts can have gray areas regarding the royalty provisions that apply to a particular transaction."

Or, as Clint Black put it, "Accountability is a great word, because it’s about accounting. And as far as I know, that’s not an art, it’s a science."

Whew!

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