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The music industry is again under legislative assault on both coasts.

In California, state senator Kevin Murray has made good on last year's promise to return to his battle for artists' rights. The Los Angeles Democrat has introduced four bills that will alter contract law for musicians and music labels. Murray claims that his legislation addresses longstanding resentment by artists about oppressive contracts and questionable accounting procedures.

Murray's bills would overturn a music industry–backed exemption to California's general seven-year limit on employment contracts that can prevent artists from seeking better deals or becoming free agents. The present exemption can keep artists tied to a record label for 20 years or more. Murray's bills would also modernize the industry's accounting practices.

Last year, the state assembly heard plenty of testimony from disgruntled artists over the restrictive contracts. Responding to artists' pleas for comprehensive reform, Murray shelved a bill at that time and came back this year with four new ones. "I still think a lot of this is ripe for discussions with the companies and the artists," said the former artists' agent. The music industry employs 28,000 Californians, according to the Hollywood Reporter.

Cary Sherman, president of the Recording Industry Association of America (RIAA), criticized Murray's efforts, claiming that they would damage an industry in its third year of declining sales. The US music business sold 104 million fewer CDs and cassettes in 2002 than in 2000, according to recently published statistics compiled by industry tracking organization Nielsen SoundScan. "Collectively, industry artists and labels alike are seeing layoffs, retail stores closing, double-digit sales declines, and that impacts the economics of everybody," Sherman stated.

Some labels, notably Universal Music Group and Bertelsmann Music Group, are reportedly receptive to accounting reforms, including outside audits that would give musicians accurate numbers about discs manufactured and sold. On March 20, two days after news of Murray's bills issued from Sacramento, the Los Angeles Times reported that representatives of Warner Music Group met privately with lawmakers to discuss an overhaul of its royalty accounting process.

Among WMG's proposals are a new contract with its Warner Bros., Elektra, and Atlantic labels to stop computing royalties based on suggested retail prices of CDs and instead begin paying artists a percentage of the wholesale price received from retailers. Warner's new contract would also eliminate deductions invented during the vinyl era, including a 25% "container" deduction and a 25% "new media" deduction. WMG promised to pay artists higher royalties for downloaded songs, and to pay interest "at prime rates" to artists for unpaid royalties found in any audit. Warner also said it would reimburse artists "for costs of any audit that reveals under-crediting of royalties exceeding 10%." Amazingly, record labels have traditionally barred artists from examining such records, according to the LA Times, instead providing them only with royalty statements.

EMI Group and Sony Music have yet to endorse any reform efforts. Last year, Sony was embroiled in a prolonged and embarrassing dispute with top-selling act Dixie Chicks; it is still in litigation with rock band Incubus, which is seeking to be freed from its contract with the label. On March 18, LA Times reporter Jeff Leeds offered a trenchant analysis of the band's accounting dispute with Sony, demonstrating how a CD wholesale price of $12.04 gets winnowed down to $5.53 through a series of accounting deductions, including $1.63 for promotional copies, $1.84 for "new technology investments" (the CD is now more than 20 years old), and $1.84 for packaging. The band's "33%" royalty is paid on the reduced amount, not on the manufacturer's wholesale list price.

Leeds quotes industry insiders who claim that over the past seven years, Sony Music has made approximately $35 million in profit on $76 million in sales of Incubus recordings, while the band's manager, Steve Rennie, states that each member has been paid approximately $121,000 per year. The label and the band have widely divergent ideas about music video production and promotional costs for the band's hit album Morning View. Sony claims the total at $13 million; the band estimates it at $7 million.

Such disputes are certain to fuel legislative discussions about bills such as Murray's. In New York the speaker of the state assembly, Sheldon Silver (D, NYC) recently announced his intention to reintroduce his "Artistic Freedom Act," which would also limit recording contracts to seven years. US Representative John Conyers (D, MI) has discussed introducing national legislation to limit contracts, perhaps after seeing what California lawmakers do.