Sour Notes in the Music Biz

In one of his old comedy routines, Steve Martin imagines himself hauled into court for bank robbery. He seeks dismissal of the charges on the grounds of forgetfulness. "Your Honor," he pleads, "I forgot that bank robbery was a crime."

That sort of forgetfulness seems widespread and persistent in the music industry. On Tuesday, May 4, several major record labels and music publishers agreed to pay approximately $50 million to settle an investigation by the New York State Attorney General's office into unpaid royalties for thousand of recording artists. Among the list of underpaid performers were big names as well as relative unknowns, both living and dead—long-established stars such as David Bowie, Billy Idol, Tom Jones, Dolly Parton, and Luciano Pavarotti; more recent ones such as Sean Combs, Gloria Estefan, and Dave Matthews; and departed ones such as Elvis Presley and Frank Sinatra.

Some payments in arrears were relatively small—$2325 owed to Willie Nelson, for example—but others exceeded $100,000. The largest amount due was almost $230,000, owed to 1950s' crooner Tommy Edwards, according to NY Attorney General Eliot Spitzer. "We have this misperception that artists have all gained enormous wealth," Spitzer said at a press conference. "But there are many artists who struggle, who have one successful song, and they depend on these royalties."

The settlement concluded a two-year inquiry in which record labels pleaded that many payments couldn't be delivered because artists or their heirs couldn't be found. (It's baffling that a record label's accounts payable department would have trouble reaching Presley's or Sinatra's heirs.) Under the agreement struck with Spitzer's office, music publishers and record labels promised to make better efforts to locate artists owed money, by putting ads up on company websites and working more actively with performers' unions. Signing the deal were BMG Music Publishing, BMG Music, EMI Music Publishing, EMI Music North America, the Harry Fox Agency, Sony Music Entertainment, Sony ATV Music Publishing, Universal Music Group, and Warner Music Group. Unclaimed royalties will go to the state if artists or their heirs can't be located. A BMG spokesman encouraged artists who may be owed royalties "to contact their record labels with updated information."

Unpaid or underpaid royalties are classic problems for recording artists. In January 2002, Universal Music agreed to set up a $4.75 million fund to pay artists (or their heirs) for "accounting irregularities" stretching back over several decades. That case, brought by singer Peggy Lee, and settled just a few days before her death, was declared a class action suit on January 14 of that year by Los Angeles Superior Court Judge Victoria Gerrard Chaney. It was a victory not only for Ms. Lee, but also for many artists whose most prolific years were in the 1940s, '50s, and '60s—including Louis Armstrong, Pearl Bailey, Patsy Cline, Ella Fitzgerald, and Billie Holiday. Many current artists have had nasty and very public disagreements with their record labels over royalties. The Recording Artists' Coalition is working with sympathetic legislators, such as California State Senator Kevin Murray, to reform the recording industry's accounting practices.

Mistrust and ill will in the music business cut in many directions, however. Anyone who has seen the documentary film Standing in the Shadow of Motown knows that the session musicians who created and sustained the "Motown sound" of the 1960s got shortchanged, while a few superstars and executives got rich. Those musicians, collectively known as the "Funk Brothers," got their due acknowledgement, if not their due reward, as a result of the film's success, with a tour that filled concert venues nationwide.

On April 28, the film's producers, Sandy Passman and Allan Slutsky, sued the Funk Brothers for breach of contract. The producers claim that the Funk Brothers (Jack Ashford, Bob Babbitt, Joe Hunter, Uriel Jones, Joe Messina, and Eddie Willis) signed a binding contract in February 2003 giving Passman and Slutsky's Rimshot Management exclusive managerial rights for two years. The Brothers attempted to terminate the contract a year later, after earning more than $1 million touring, Rimshot asserts. The partnership is owed approximately $30,000 in unpaid commissions, claims the lawsuit filed in California Superior Court in LA.

May 11 is the street date for a re-release of the film's soundtrack, a two-CD package on Universal Music's Hip-O record label. Many classics from the Motown era are also being made available for digital download for the first time, according to Billboard. Motown Records is licensing its first 45 singles, and 45 rare albums, to Apple's iTunes Music Store as part of the label's 45th anniversary celebration. "The promotion will run through May 25 and coincides with the May 17 ABC broadcast of the 'Motown 45' TV special," noted Billboard music editor Jonathan Cohen.

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