Michael Jackson, Captain EO and the business of conquering the world- Part 6 – “Unfree Masters”

By The Last tear (Lou)

I remain just one thing, and one thing only — and that is a clown.

It places me on a far higher plane than any politician.

Charles Chaplin, 1960.

 

Michael Jackson, Byonce, Lady Gaga, Britney Spears, Jay-Z, Madonna, Elvis,… .

So many names, so many talented people with pretty faces and bodies, beautiful clothes and incredible make-up; fantastic music and moves; crowded concerts and hundreds of fans screaming and applauding their idol! What a glamorous life indeed!

Behind this gorgeous appearance, there is another picture that very few of us wish to look at or to know about it. Why? Because it is ugly and it ruins our fantasy world. But for the sake of these talented people – our musical idols – we need to do it.

There are people from the academic world who have studied the music industry and have published their research and studies. One of them is Matt Stahl who is assistant professor of information and media studies at the University of Western Ontario. Mr. Stahl has published several articles and a book, Unfree Masters, Recording Artists and the Politics of Work, Duke University Press, 2013.

The words “unfree masters” were coined by Carole Pateman in her revolutionary 1988 book The Sexual Contract and describe the stereotype of the husbands in market society.

Matt Stahl has borrowed the terminology and applied it in a new area: the recording artists. In his book, we learn about how a law which protected the recording artists like any other working categories was changed in a way that the major entertainment companies or their subsidiaries could take more advantage of these “Masters” who have become now “Unfree” or perhaps we should say more “Unfree”.

We are talking mostly about successful recording artists not the ones who stay a short time and do one or two songs. Unfortunately, the “short time stars” are the most unfortunate in the industry.

Why these idols are “Masters”? Because they have some autonomy while ordinary people who work 9-5 has to obey and to follow their employers’ rules.

Also these “Masters” are talented people who are born with a gift: the gift of music. And because of that rare gift, “the owners” of the music industry are ready to “invest” on these artists – the bosses give them “the advances” which they collect back later. Let us not forget that successful recording artists own often the music they have created and receive royalties; that makes them “a rentier” as Mr. Stahl mentions in his book.

Why they are “Unfree”? Because the industry “ties them up” with a piece of paper called “contract”. Usually, the contracts are written in a language that only an attorney could understand it. That is why the artists should hire attorneys who tell them what their contracts mean – what they can do and especially cannot do.

Contracts are our life’s companions. We have perhaps the freedom of choosing between them but we do not have the freedom of avoiding them entirely; the job contract, the business contract, the flat/ apartment contract, the marriage and divorce contracts, etc., just to mention some of the contracts that almost all of us use to sign.  

Some of the contracts are written and some are oral and some behavioral. What is behavioral “contract”? Something related to a code. A code which tells us how a person should behave / act in a given situation, in a given environment and in a given time. If you respect the code, you are safe otherwise you are on thin is!

A quote from the book “Unfree Masters”:

“The recording artist – the successful recording artist, in particular – is a double figure. On the one hand, she is a symbolic figure offered for our consumption, contemplation, and identification []. On the other hand, she is a political and economic actor, a working person whose contractually governed relationship to her company is sometimes one of real subordination. In this doubleness, the recording artist embodies a paradox: as an agent of self-expression under contract to a major entertainment conglomerate or a subsidiary company, the recording artist is both autonomous and the target of control. He must be free to generate new material and unfree when it comes to the labor and intellectual property covered by the contract []” (page 2)

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Since the most part of the music industry is located in the state of California, the American and the Californian laws and rules are in order. The most important law in our study is section 2855 of the California Labor Code, called “seven-year rule”:

http://www.wikinvest.com/stock/Warner_Music_Group_(WMG)/Enactment_Legislation_Limiting_Terms_Individual_Bound_Personal_Services 

California Labor Code Section 2855 (“Section 2855”) limits the duration of time any individual can be bound under a contract for “personal services” to a maximum of seven years.

The Labor Code is a part in the California Civil Code written in 1872. In the first version of the Labor Code, the employees were bound only two years to an employer but in 1931, that changed to 7 years.

In 1943, Olivia de Havilland, the British actress who played in Gone with the Wind (1939), used section 2855 in her fight against Warner Bros. De Havilland wished to free herself from the contract she had with the Warner. On August 23, 1943, she filed a lawsuit and on December 8, 1944, she won her case. Her victory had such an incredible impact that even today other actors use her case as an example in their fight against the big companies. Actually, the section 2855 is also called “De Havilland law”:

Olivia De Havilland

Olivia De Havilland

 http://www.reuters.com/article/2007/08/24/industry-lawsuit-dc-idUSN2329585820070824

De Havilland lawsuit resonates through Hollywood   

By Matthew Belloni Thu Aug 23, 2007 11:10pm EDT

LOS ANGELES (Hollywood Reporter, ESQ.) – If newly emancipated Hollywood talent agent Ed Limato brings his exclusive Oscar party to his new home at the William Morris Agency, he should reserve a spot for an unlikely guest of honor: 91-year-old actress Olivia de Havilland.

Sixty-four years ago Thursday, de Havilland and her lawyers filed the lawsuit that led to the “seven-year rule” for personal services contracts, helping bring down the old studio system and bestowing unprecedented power on talent and, ironically, agencies like the one Limato successfully sued to escape.

California’s seven-year rule, also known as Labor Code Section 2855, is such an accepted tenet of entertainment law that it’s hard to imagine the business before it existed. De Havilland, who received her first Academy Award nomination for 1939’s “Gone With the Wind” and went on to win best actress twice, sued Warner Bros. when the studio repeatedly extended her contract after “suspending” her for rejecting the roles it suggested. It was an uphill battle (Bette Davis lost a similar case in the 1930s), but the California Court of Appeal ruled in 1944 that de Havilland was not bound to perform services beyond seven years from the start of her contract. The case became state law, significantly shifting negotiation power from studios to talent and allowing agents like MCA’s Lew Wasserman to usher in the era of top-dollar star salaries and the commissions and packaging fees that can make agenting such a lucrative business.

Today, film and television lawyers say the seven-year rule is such a given in negotiations that serious disputes rarely arise. Still, the law remains a sharp arrow in the quiver of disgruntled talent, especially in the music industry, where such artists as Courtney Love and Smashing Pumpkins have cited the rule in challenging open-ended deals that require delivery of several albums (though the record labels lobbied for and received a de facto exception allowing them to recover damages from artists for undelivered albums on deals voided by the rule).

The Limato arbitration brought the seven-year rule full circle. During his 32-year, two-stint association with International Creative Management, Limato had made superstars of such free-agent clients as Denzel Washington, Mel Gibson and Steve Martin. Limato’s own deal, ICM argued, was different than de Havilland’s contract with Warners because Limato could have left but chose to renegotiate and amend his agreement several times since 1996, most recently in 2006. That deal ended in June and provided for a three-year “consultancy” and a promise not to compete with ICM during that time. Did the renegotiations restart the seven-year clock? Relying in part on a recent case involving boxer Oscar De La Hoya, veteran entertainment arbitrator Diane Wayne said no, freeing Limato and, adding insult to injury, requiring ICM to pay his attorneys’ fees.

“They had locked Ed up and thought they had done it in a way that skirted the rule,” says Limato’s lead litigator, George Hedges. “I think every (agency) is taking a beat now, looking at their practices.”

Hedges says the Limato case shows the seven-year rule lurks anywhere in the business where talent — be they actors, directors, agents or executives — sign successive options to perform unique services without a reasonable window of time between deals. That’s reason enough for nervous business affairs executives to double-check their deal files.

De Havilland now lives in France and hasn’t acted since 1988. But her efforts more than six decades ago resonate today.

Reuters/Hollywood Reporter

Olivia Newton-John

Olivia Newton-John

While the film industry’s actors and actresses used the section 2855 and won their lawsuits, their colleagues in the music industry had more difficulties. The first case that had a huge impact in the music industry was Olivia Newton-John’s conflict with MCA (Unfree Masters, pages 123-125, 137, 140-141) in 1979. The artist wished to free herself from her contract with MCA but she lost her case.

Even so, her case was a wake-up call for the industry which was about to become more dependent on superstars – the blockbuster business model. The big companies needed to have the artists under total control: 

“[] Newton-John’s conflict with MCA sent shock waves through the industry. in the context of a profit crisis, the capacity of superstar artists to quit at the seventh anniversary of the signing of their contracts directly threatened both crucial streams of income and the capacity of companies to act and react in a changing market with a minimum of friction []” (Unfree Masters, p. 109).

In fact, as Mr. Stahl has mentioned in his book (Unfree Masters, p.251, note 86), the Newton-John case triggered other cases: Donna Summer (1980), Melissa Manchester (1981), Sammy Hager (1981), etc.  

The other relevant case mentioned in the book Unfree Masters (pages 107-109) is Teena Marie (Mary Brockert) vs Motown:

Teena-Marie

Teena-Marie

http://www.lawlink.com/research/caselevel3/61226 

 This appeal arises from a contract dispute between Motown Record Corporation (Motown) and Jobete Music Company, Inc. (Jobete) and singer, songwriter Tina Marie Brockert, known professionally as Teena Marie. (See also Motown Record Corp. v. Superior Court (1984) 155 Cal.App.3d 482 [202 Cal.Rptr. 227].)  Teena Marie appeals from a preliminary injunction restraining her from performing her singing and songwriting talents for anyone other than Motown and Jobete until their contracts expire. At the heart of this appeal is an issue which has received considerable attention in law reviews but has never been addressed by the appellate courts []

http://articles.latimes.com/2004/dec/29/entertainment/et-teena29 [] The woman born Mary Christine Brockert in Santa Monica and reared nearby in ethnically diverse Venice charted half a dozen Top 10 R&B singles before extending her popularity in 1984 with “Lovergirl,” which took her to No. 4 on Billboard’s pop singles chart. That was with Epic Records, where she moved after a landmark legal fight to get out of her Motown contract. She won that lawsuit, and it led to passage of a law known as “the Brockert Initiative,” which limits a record company’s ability to keep a musician under contract while refusing to release any of that performer’s music. It made her an accidental hero to other musicians. “It wasn’t something I set out to do,” she says, “I just wanted to get away from Motown and have a good life. But it helped a lot of people, like Luther Vandross and the Mary Jane Girls and a lot of different artists, to be able to get out of their contracts.”[]

What did happen after Newton-John and Teena Marie cases? What did the industry do? With the help of RIAA – Recording Industry Association of America – the industry forced the Californian lawmakers to exclude recording artists from seven-year-rule law. That happened in 1987. This change angered the artists, their lawyers and the artists’ organizations:

http://academic.udayton.edu/Lawecon/Readings/Labor%20law%20harvard.pdf

Section 2855 has been an important aspect of almost every significant dispute between a recording artist and a major record company [*2634] during the last decade [] Section 2855 has had a different effect in the recording industry context – a context in which the provision has not been tested in court. Record companies, wary of the possibility that a section 2855 holding favorable to artists could grant them free agency, have renegotiated dissatisfied artists’ contracts, often providing more generous terms and large advances. n30 Seeking greater protection for record companies, the RIAA lobbied in 1985 to extend section 2855’s contract ceiling to ten years. n31 Failing in this effort, the RIAA offered a new proposal, presenting two main arguments.

First, because record companies necessarily make “large investments in an artist’s career based primarily on the promise that the act [will] deliver” the contractually stipulated number of albums, section 2855 “was unfair because [it] allowed an artist to walk away from a seven-album recording contract after seven years, regardless of whether the [artist] had fulfilled its contractual albums.” n32

Second, industry lobbyists argued that record companies did not “earn money on successful artists until after the fourth album and would be severely injured if the remaining three albums were not delivered.” n33 In 1987, after several revisions, the RIAA’s proposal became section 2855(b). n34 Subsection (b)(3), which has since ignited controversy, provided record companies the protection they sought by giving them the right to sue artists who invoked their rights under section 2855(a)[]

Nevertheless, several recording artists who were not pleased with their contract and the company they worked for filed lawsuits: George Michael (1992), Luther Vandross (1992), Don Henley (1993), Glenn Frey (1994), Metallica (1994), the Smashing Pumking (1997), Courtney Love (2000).

The George Michael case

George Michael

George Michael

http://www.nytimes.com/1994/06/22/arts/george-michael-loses-lawsuit-against-sony.html?pagewanted=all&src=pm

George Michael Loses Lawsuit Against Sony

By RICHARD W. STEVENSON
Published: June 22, 1994

In a case that mixed questions about artistic freedom, money and ego, a British judge today rejected a bid by the pop singer George Michael to be freed from his long-term recording contract with the Sony Corporation.

The ruling was welcomed by industry executives, who saw in Mr. Michael’s case a challenge to the traditional practice of signing artists to multi-album deals as a way to offset their heavy investments in discovering and promoting new acts.

But it prompted Mr. Michael, one of the biggest stars of the late 1980’s, to call his situation “professional slavery” that left him little control over his own work and career. A 15-Year Contract

Mr. Michael had filed suit against Sony a year and a half ago, contending that the eight-album contract he signed in 1988 was unfair under British and European Union law because it bound him to the company for up to 15 years and gave him no control over how his music would be marketed.

(Please read the entire article in the Further reading section).

The Dan Henley case

Dan Henley

Dan Henley

http://articles.latimes.com/1993-04-29/entertainment/ca-29099_1_david-geffen

EMI Offer Intensifies Henley Feud With Geffen: Pop music: The $3-million bid may help the former Eagles singer fund his bitter legal battle to leave his current label.

April 29, 1993|CHUCK PHILIPS | SPECIAL TO THE TIMES

[] Henley’s association with Geffen dates back to 1971 when he started as a drummer and singer for the Eagles–the hugely successful band that was managed by Geffen and his partner Elliot Roberts, and which recorded for Geffen-run Asylum Records. Henley has been affiliated with Geffen as a solo artist since the mid-’80s.

Under the so-called “seven-year statute,” entertainers cannot be forced to work for any company for more than seven years. Some record company executives believe the statute won’t hold up in court, but have been reluctant to test it because an adverse ruling could lead to a wholesale exodus of veteran artists.

To avoid testing the law, companies have usually rewritten the contracts of best-selling artists, offering higher royalty rates and other considerations before the seven-year limit is reached.

Earlier possible showdowns over the statute–including a recent case filed by Luther Vandross against Sony-owned Epic Records–were avoided when the artists settled out of court for more money and upgraded contract terms.

But Henley’s lawyers insist their client is not just using the statute as a negotiating weapon.

“This is not a ploy to renegotiate Don’s contract,” said John Branca, one of the Los Angeles attorneys representing Henley in the case. “And it’s not just a seven-year-statute case either. There are other positions in this suit that are extremely important to the case.”

Henley’s unhappiness with Geffen’s marketing and promotion of his records has been rumored in industry circles for years.

The dispute that triggered the legal battle, however, took place last fall when the singer wanted a recording of a live appearance on “MTV Unplugged” to qualify as one of the two studio albums he owed the company, sources said. Although Geffen approved release of the record, he refused to count it against the balance of albums due, sources said.

That rejection of the “Unplugged” project infuriated the already disgruntled artist and he notified Geffen in December that he would no longer record for the company after 1992, according to parties close to Henley.

Besides the seven-year statute, Henley said he was terminating his contract because he believed Geffen–who sold his company in 1990 to MCA Music Entertainment, which in turn sold it six months later to Matsushita Electrical Inc.–was no longer actively involved in running the label.

“David Geffen’s company is no longer the one I signed with,” said Henley, in a phone call from Washington, where he was lobbying legislators on behalf of environmental legislation. “It’s been sold twice in the past couple of years, and I never even got so much as a phone call from him about it. The entire thing is very dehumanizing. I feel like a commodity (at Geffen), like soy beans or pork bellies.”

The current legal furor not only promises to test the validity of the seven-year statute, but also pits industry honchos Geffen and Irving Azoff, a longtime Henley adviser, against each other. []

The Courtney Love case 

http://academic.udayton.edu/Lawecon/Readings/Labor%20law%20harvard.pdf

Courtney Love

Courtney Love

In 1999, Courtney Love, frontwoman for the band Hole, invoked section 2855(a) and terminated Hole’s contract with Geffen Records, a subsidiary of Universal. n36 The contract required Hole to deliver two albums to Geffen and gave Geffen three options for delivery of an additional five albums. n37 In response, Geffen and Universal sued Love under section 2855(b), contending that Hole owed the companies damages for the five undelivered option albums. n38 Love cross-complained, challenging [*2637] the constitutionality and applicability of section 2855(b). n39 Love’s suit enlivened a burgeoning artists’ rights campaign, which quickly focused on section 2855(b).

Senator Kevin MurrayJay CooperLondell McMillanJB

From left: Kevin Murray, Jay Cooper, Londell McMillan, and John Branca

The fights continued and several artists and their attorneys were engaged in the discussions. A Democratic State Senator Kevin Murray studied the artists’ complaints and supported them. In September 2001, Murray organized an informal but sensational hearing before the California State Senate’s select committee on the Entertainment Industry.

Senator Murray suggested some changes in the 2855 – the bill 1246 – which was discussed in another hearing in 2002. During the hearings, several artists and their attorneys talked and defended the artists’ rights for example Jay Cooper, Londell McMillan, and John Branca. The music industry was represented by the RIAA which opposed strongly the bill 1246.

Patti Austin

Patti Austin

 “ [] The jazz and R&B singer Patti Austin told the assembled lawmakers, witnesses, and members of the audience and press that “I was always taught that Lincoln freed the slaves, and I didn’t realize that he excluded recording artists from the list. [] “(Unfree Masters, page 144).

http://www.billboard.com/articles/news/80219/henley-to-testify-at-hearing-on-artists-rights

Henley To Testify At Hearing On Artists’ Rights

Don Henley, co-founder of the Recording Artists Coalition, has accepted an invitation to appear at the Senate Judiciary Committee hearing Tuesday (April 3) called by chairman Orrin G. Hatch, R-Utah, to study the problems faced by artists, record companies, and music Web site entrepreneurs in the post-Napster environment.

“There has never been so much contempt for artists by the heads of these record companies,” Henley says. “I want to ask the senators to make sure that artists are represented at the table on all of these Internet issues. We have concerns about fair use; we have concerns about possible compulsory licensing. We want to make sure that the majors don’t control the market so much that there won’t be independent Internet distribution, and we have views on [California's] seven-year statute.”

Henley says he will be joined at Tuesday’s Senate hearing by other artists, legal counsel, and Noah Stone, director of Artists Against Piracy. “We’re working together on this, but our organizations have not merged,” says Henley.

No witness list has been released by the committee, but Billboard has learned that the lawmakers are specifically pushing to have company executives on the panel and not their Washington, D.C., lobbyists. According to several sources, among the other panelists to be invited are Napster president Hank Barry, as well as a record label executive, a movie company chief, and a top official of a music Internet company.

The Napster Web site says that “many members of the Napster community” will attend the hearing and visit with their Congressmen afterward. As previously reported, Napster is prepping for the hearing with a series of new promotions.

Unfortunately, the artists and their attorneys were not well-prepared and could not defend entirely their cause. The bill 1246 did not pass but another one – the bill 1034 – which benefits more the industry, was adopted.

http://news.bbc.co.uk/2/hi/entertainment/1524597.stm

Tuesday, 4 September, 2001, 11:03 GMT 12:03 UK

Music stars lead contracts challenge

US musicians led by Courtney Love and Don Henley are to fight back at what they say is unfairness in the record industry on Wednesday. More than 100 artists, denouncing what they claim are corrupt business practices, are to lobby a California state hearing about recording contracts.

Love is due to give evidence at the Sacramento hearing of the Select Committee on the entertainment industry. The singer is also among a crop of artists involved in separate legal fights with record companies over their contracts. “I’m ready to take this thing all the way to the Supreme Court,” she said when filing her case. “Artists who have generated billions of dollars for the music industry die broke and uncared for by the business they made wealthy.” This hearing comes at a time when several lawsuits, by acts like the Dixie Chicks and Hole singer Love against big labels, are going through US courts.

Controversial

The big issue is California’s so-called “seven-year statute”, which ties musicians to longer contracts than anybody else in the entertainment business.

A controversial 1987 amendment to the California labour code gave music labels the right to sue artists for undelivered albums at the end of seven years. The musicians, including former Eagles vocalist Henley, singers Sheryl Crow, Alanis Morissette and Tom Petty, have formed a group called the Recording Artists Coalition (RAC) to oppose the rule.

They claim that young artists are often forced to accept such terms in the bid to get a recording contract, leaving them later with little control over their careers.

Attorney Jay Cooper, who represents Crow and other performers said: “It’s a one-way arrangement.”Artists should be treated as all the people in the state of California.”

Unknown artists

The interests of the big record labels – Universal, Sony, EMI, Warner and Bertelsmann – will be represented at the hearing by officials from the Recording Industry Association of America (RIAA). They argue that the binds are necessary to ensure the record companies get a return on their investment in unknown artists who may not succeed.

“They pay vast amounts on advances, promotional and marketing costs for these artists and rely on the handful of artists who succeed to recover their losses and make a profit,” said Cary Sherman, senior executive vice president and general counsel of RIAA.

The RIAA argues that it is arrangements like the seven-year statute that helps spread the risk of new talent, maintaining the “vibrant” US record industry. But the artists disagree and their complaints have drawn enough concern from California legislators to lead to this hearing.

State Senator Kevin Murray, who is to chair the hearing, said that they wanted to clear up “some ambiguity” in the law and clarify it for both artists and their employers. “Virtually every industry in California, with the exception of the record industry, is held to personal-service contracts that cannot legally run longer than seven years,” Murray said.

On Thursday Love will counter sue the world’s largest record label, Universal Music Group, for $30m (£21m), who are suing her for failure to complete five owed albums. Last week, the country-pop act, the Dixie Chicks, announced that they were suing Sony in order to escape their contract with the music giant. Henley, Luther Vandross and Oscar de la Hoya are all involved in similar disputes with their record labels.

Primary source:  http://www.reuters.com/news_article.jhtml?type=entertainmentnews&StoryID=1240772 Secondary source: http://prince.org/msg/8/18838?pr

Record Companies Say Past Contracts Fair Deals Londell McMillan Mentioned

July 23, 2002 09:46 PM ET
By Sue Zeidler

LOS ANGELES (Reuters) – Major record companies, seeking to quash a brewing revolt by pop stars over royalty payments, on Tuesday released a study backing its claim that the embattled industry has negotiated past contracts fairly.

The release of the study, commissioned by the Recording Industry Association of America, came as lawyers for musicians told a California state Senate hearing in Sacramento that the record industry has used faulty accounting to cheat them out of royalties.

To bolster its claim that the record business is on the up and up, the RIAA released a study by Michigan State University professor Steven Wildman showing that recording contracts have reflected terms agreed to by all parties.

The RIAA is a trade group for the big five labels, including Bertelsmann AG BMG, EMI Group Plc, AOL Time Warner Inc,Vivendi Universal and Sony Corp.

The study, an analysis of over 500 recording contracts between artists and the five major labels between 1994 and 2000, found that in all but one of the cases, artists were represented in their negotiations with record labels by lawyers.

The study also found that deals renegotiated after hit albums tended to be more financially rewarding to artists, evidence, the record industry said, that showed it has shared the wealth with its hit-makers.
“A glaring misimpression exists that record labels are high profit, low risk companies uninterested in paying artists their fair share,” said Steven Marks, senior vice president, legal affairs for the RIAA, said in testimony before the state senate panel on Tuesday.

RECORDING ARTISTS ATTEND HEARING

“That’s simply not reality. It is no accident that many of the higher-profile accounting and other financial disputes that have arisen over the years have been resolved with new contracts, not a parting of the ways,” he said.

Meanwhile, musicians’ representatives, including Londell McMillan, legal counsel to the Artist Empowerment Coalition, that includes such artists as Stevie Wonder, Faith Evans and Roberta Flack, argued that record labels routinely underpay royalties and tie artists to unfair contracts.

Recording artists Sam Moore, the veteran soul singer of the 1960s, and rapper Montell Jordan were also at the Sacramento hearing, according to people who attended.

The hearings were called by California Senate Judiciary Committee chairman Martha Escutia, and Senator Kevin Murray, who has authored a bill to repeal an amendment to the California labor code that allows labels enter into lengthier contracts than other sectors.

Artists have decried that legal loophole as well as industry accounting practices, which they say are used to cheat them out of royalties.

McMillan, who also represented Prince in his battle to break his contract with Warner Brothers Records, could not be reached for comment.

But other entertainment industry veterans said the hearing was long overdue.

“Record company accounting is a subject that needs to be discussed and dealt with. I don’t think it stems from any criminal intent at all, but let’s say that every time you take an audit of a record company’s books, you find money due,” said Jay Cooper, an entertainment lawyer in Los Angeles.

“I’ve always been successful at settling these royalty disputes without litigation,” he said. “Obviously these contracts are subject to interpretation and the labels will take the interpretation that best favors them,” he said.

http://articles.latimes.com/2002/dec/03/business/fi-music3

Music Labels Urged to Revise Royalties

A state Senate panel criticizes record firms’ accounting and threatens to take action. December 03, 2002|Chuck Philips | Times Staff Writer

The California Senate Select Committee on the Entertainment Industry issued a report Monday calling on record labels to reform accounting practices or face legislative penalties in the future.

The report was released by Sen. Kevin Murray (D-Culver City), the chairman of the committee. It follows a trio of hearings in Sacramento attended by more than a dozen music stars, including Courtney Love and Don Henley, who complained about being cheated by their record labels.

“I urge the record companies to consider … changes on their own to avoid … legislative action,” Murray says in the report.

During the hearings, representatives from the nation’s five largest record corporations — Vivendi Universal’s Universal Music Group, Bertelsmann’s Bertelsmann Music Group, Sony Corp.’s Sony Music Entertainment, AOL Time Warner Inc.’s Warner Music Group and EMI Group — denied to legislators that they gouge artists of earnings. Last month, however, BMG and Universal announced plans to revise their royalty accounting practices.

In the report, Murray chastises labels for forcing artists to reimburse them for the cost of recording albums and videos. He also criticizes record companies for compelling artists to pay back costs associated with marketing and independent radio promotion.

Above all, though, the report focuses on the problems surrounding accounting for artist royalties. Murray says that artists believe they are forced to sign agreements that favor the record company, and that acts are not even paid the royalties due under these contracts.

“In our legislative hearings, it was clear that artists feel they are being systematically cheated out of their royalties,” Murray says in the report. “The hearing showed that at the very least there is purposeful neglect on the part of the record company accounting departments.”

During the hearings, auditors said firms often capitalize on contracts that are loaded with royalty policies designed to override provisions benefiting artists. And because few artists can afford to audit their labels, the report says, these practices often result in windfalls for the record companies.

Murray also chides the labels for lacing contracts with clauses that essentially preclude any penalty for the underpayment of royalties — even if caught.

“Each recording contract contains a clause that the record company, no matter how egregious their behavior, will never be liable for more than the amount of royalties due,” the report says. Such clauses protect companies and entice labels to hide money from artists.

The report suggests two potential solutions. One is to introduce legislation defining the practice of paying royalties to an artist as a fiduciary duty. The second is to write a law designating severe penalties to those companies that engage in a pattern of underpayment.

“Government is usually loath to actually dictate the terms of contracts between private parties,” the report says, “but when the relative leverage of the parties significantly favors one party, government often steps in to protect the party with the least leverage.”

Defending the artists, John Branca said:

http://www.open.ac.uk/researchprojects/music/cilm/docs/Matt_Stahl.pdf

“Record companies have gotten bought and sold so often over the last 25 years. What’s happened during that period, the one constant is that the artists are the constant. When you look at new artist contracts that call for seven albums, based on the current standard in the business that is probably a 21 year contract. Basically the artist is handed pretty much a take it or leave it contract, that calls for up to seven albums, with a company that may get sold two or three times during the term of that contract, and what ends up happening is the artist gets stuck there, like it or not.”

In an email conversation with the blog, Mr. Stahl wrote:

“Branca said that in a hearing on a bill (1246) proposed by California State Senator Kevin Murray. The hearing was before the CA State Senate Judiciary Committee on March 19, 2002 in Sacramento, California. Numerous state senators were present, as well as music industry representatives, including Hilary Rosen (RIAA), Glen Barrows (Concord Records), Jeff Ayeroff (Warner), Steve Berman (Interscope), Don Henley, Jay Cooper (artist attorney), and Simon Renshaw (artist manager). 

None of the testimony has been published or is available online. I transcribed it all from cassettes that I obtained from the California State Archive. If you’ve read the book then you’ve seen many of the parts that I think are interesting.”

A big thank you to Mr. Stahl who allowed us to quote from his book and answered my questions.

Next blog will study Michael Jackson’s fights with the industry during his career.

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Some links and further readings

Matt Stahl:

Unfree Masters, Recording Artists and the Politics of Work, Duke University Press, 2013

From Seven Years to 360 Degrees: Primitive Accumulation, Recording Contracts, and the Means of Making a (Musical) Living, Matt Stahl, tripleC 9(2): 668-688, 2011 ISSN 1726-670X http://www.triple-c.at

http://www.open.ac.uk/researchprojects/music/cilm/docs/Matt_Stahl.pdf

The Harvard Law Review Association:

http://academic.udayton.edu/Lawecon/Readings/Labor%20law%20harvard.pdf

Seven year rule:

http://www.jstor.org/discover/10.2307/1342774?uid=3738984&uid=2129&uid=2&uid=70&uid=4&sid=21102564543847

The De Havilland case:

http://www.altfg.com/blog/actors/olivia-de-havilland-contract-lawsuit/

The Teena Marie case:

http://www.guardian.co.uk/music/2010/dec/27/teena-marie-obituary

The George Michael case:

http://www.independent.co.uk/news/uk/law-report-recording-agreement-enforceable-panayiotou-and-others-v-sony-music-entertainment-uk-ltd–chancery-division-mr-justice-jonathan-parker-1-june-1994-1424669.html

http://news.bbc.co.uk/2/hi/entertainment/3278909.stm

http://www.nytimes.com/1994/06/22/arts/george-michael-loses-lawsuit-against-sony.html?pagewanted=all&src=pm

In a case that mixed questions about artistic freedom, money and ego, a British judge today rejected a bid by the pop singer George Michael to be freed from his long-term recording contract with the Sony Corporation.

The ruling was welcomed by industry executives, who saw in Mr. Michael’s case a challenge to the traditional practice of signing artists to multi-album deals as a way to offset their heavy investments in discovering and promoting new acts.

But it prompted Mr. Michael, one of the biggest stars of the late 1980’s, to call his situation “professional slavery” that left him little control over his own work and career. A 15-Year Contract

Mr. Michael had filed suit against Sony a year and a half ago, contending that the eight-album contract he signed in 1988 was unfair under British and European Union law because it bound him to the company for up to 15 years and gave him no control over how his music would be marketed.

Mr. Michael testified that his discontent followed Sony’s reaction to his 1990 album “Listen Without Prejudice, Volume I.” With that album, Mr. Michael said, he made a deliberate decision to play down the sultry, sex-symbol image he had cultivated starting with his days with the pop duo Wham, a decision he said did not sit well with Sony executives interested only in sales and not in his development as an artist.

He also testified that Sony had sought to punish him by not promoting “Listen Without Prejudice” as aggressively as it should have, particularly in the United States. The album sold five million copies, a relative disappointment after his 1988 album “Faith” sold 14 million copies worldwide.

Sony executives testified that they had marketed the album to the best of their abilities. And Sony’s lawyers tried throughout the trial to establish that Mr. Michael was well aware of the terms of the contract he signed in 1988, and that the deal was a considerable improvement over his earlier contracts with CBS Records, which Sony acquired seven years ago. Ruling: A Fair Deal

In issuing his ruling today in the High Court in London, Justice Jonathan Parker largely accepted Sony’s view of the matter, saying that the contract was “reasonable and fair” and that Mr. Michael understood the deal.

“I am satisfied on the evidence that there is no substance in George Michael’s claim of unfair conduct by Sony or in any of the detailed complaints which he makes,” Justice Parker’s ruling said. “In particular I am satisfied that there was no such deliberate policy decision by Sony as George Michael alleges.”

At a brief news conference, Mr. Michael said that he thought there were strong grounds for an appeal and that he would probably file one.

But the singer, who turns 31 on Saturday, declined to answer questions about whether he would make good on his earlier threat never to record again for Sony.

Sony, clearly trying to avoid further damage to its relationship with Mr. Michael, restricted its official reaction to a one-sentence statement: “We have great respect for George Michael and his artistry, and look forward to continuing our relationship with him.” A Way to Recoup

The case had been followed intently in the recording industry, not just because it was a rare instance of a spat between between artist and label being aired publicly and in great detail, but because of the precedent it could have set regarding long-term contracts.

Recording companies have always argued that because they spend so much to find and develop new artists, they can recoup their investments only through long-term relationships with those relatively few acts who go on to major success. If artists were given freedom to break their contracts and walk away after an album or two, the companies would no longer be able to afford to spend so much on new talent, executives said.

“The concern we had was that the judge might have found against long-term contracts between artists and record companies,” said David Hughes, a spokesman for EMI Records in London. “Had the judge found that, it would have had quite severe implications for us in our confident ability to invest in artists.”

At the news conference, Mr. Michael said he had signed the 1988 contract “to make the best of a bad job” and sued only when left with no other option.

“In fact, there is no such thing as resignation for an artist in the music industry,” Mr. Michael said. “Effectively, you sign a piece of paper at the beginning of your career and you are expected to live with that decision, good or bad, for the rest of your professional life.”

The Dan Henley case:

http://articles.latimes.com/1993-09-01/entertainment/ca-30272_1_geffen-records

Henley Ups the Ante in Geffen Fight: Lawsuit: Singer charges that entertainment impresario conspired with record corporations to blackball him.

September 01, 1993|CHUCK PHILIPS | SPECIAL TO THE TIMES

Don Henley is turning up the heat in his bitter legal dispute with Geffen Records, charging that entertainment impresario David Geffen conspired with other powerful record corporations to blackball the Grammy-winning singer-songwriter.

Attorneys for the 46-year-old recording artist were expected to file papers in Los Angeles Superior Court on Tuesday requesting that an antitrust violation be added to Henley’s cross-complaint, which stemmed from a breach-of-contract suit filed against the artist by Geffen.

The new amendment alleges that executives at Warner Music Group, Sony Music and EMI Music assured Geffen they would not sign any artist who attempted to break their contract under the seven-year statute–the precise law Henley cited nine months ago spurring the vitriolic legal battle.

Under the statute–a controversial California law enacted 50 years ago to free actors from long-term studio deals–entertainers cannot be forced to work for any company for more than seven years. Some record executives believe the statute won’t hold up in court, but have been reluctant to test it because an adverse ruling could lead to a wholesale exodus of veteran artists from their record companies in search of better deals on the open market. Earlier possible showdowns over the statute have been avoided because artists settled out of court for more money and upgraded contract terms.

“If powerful corporations like these are having discussions to stop me from recording my music, what does that say about the state of affairs in the music industry?” Henley told The Times on Tuesday. “Unfortunately, record companies are no longer run by people who love music. They’re run by bean counters and attorneys and all that matters to these guys is the bottom line.”

Geffen dismissed the conspiracy allegations as a publicity ploy.

“I’m about as concerned about this as I am about a baked potato I ate last week,” Geffen said Tuesday in a phone interview from New York.

“The claim is absolute nonsense,” added Geffen attorney Bertram Fields. “There was no conspiracy whatsoever.”

Some of the most powerful figures in the music business are expected to be subpoenaed to respond to Henley’s allegations, including Warner Music head Robert Morgado, Sony’s Michael Schulhof and Tommy Mottola, as well as EMI’s Jim Fifield and Charles Koppelman. Allen Grubman, the New York attorney who represents Geffen Records and who was sued last year for conflict-of-interest by pop star Billy Joel, is also expected to be called to answer questions about the conspiracy charges.

Representatives for MCA-owned Geffen Records and the other three corporations–whose distribution arms are already under investigation by the Federal Trade Commission for their policies on used CDs–declined comment on the matter.

The flap erupted in December when Henley sent Geffen a letter saying he was terminating his contract, even though he reportedly owed the company two more studio albums and a greatest-hits collection. In January, the record company filed a $30-million breach-of-contract suit in Superior Court against the artist.

Henley’s attorney, Don Engel, said the latest twist in his client’s case follows an acknowledgment by Geffen under oath that he asked the heads of several record companies whether they would sign an artist who broke their contract under the seven-year rule. The executives allegedly told Geffen they would not sign anyone who took such an action, according to Engel.

“What we may have here is a conspiracy not only against Don Henley, but one intended to revoke the seven-year-rule itself,” Engel said.

Henley concurred.

“This law was designed specifically to protect artists,” Henley added. “But what good is it if the record companies are out there agreeing among themselves not to sign anyone who attempts to use it?”

Engel suggested that the alleged conspiracy may date back as far as 1991 and could have played a part in another case he handled–a similar attempt by R&B star Luther Vandross to break his contract with Sony-owned Epic Records. There is evidence, Engel says, that negotiations in that case may have fallen apart after at least one major record company took a similar position to boycott Vandross’ planned move to another label.

Legal experts suggest that Henley’s attorneys will have a difficult time substantiating the antitrust allegations in court.

“Conspiracy is very hard to prove in a court of law,” said Warren Grimes, a law professor at Southwestern University who served as the chief counsel of the monopoly subcommittee in the U.S. House of Representatives from 1980 to 1988. “In the typical case all you generally have is conduct that might indicate a conspiracy, but what you need is evidence.”

Several insiders also speculated that there may be a valid reason why other companies might not want to sign Henley.

Six years ago, the Recording Assn. of America, the trade organization that represents the six major U.S. record companies, succeeded in securing an amendment to the law that grants record firms the right to sue and recover damages for any product still owed the company by the performer opting to break his contract by invoking the seven-year statute.

If Geffen sued for the two albums his company feels Henley owes them it could cost any new label that signs Henley as much as $20 million in damages, sources said.

Besides the seven-year statute, Henley’s suit claims he was terminating his contract because he believed Geffen–who sold his company in 1990 to MCA Music Entertainment, which in turn sold it six months later to Matsushita Electrical Inc.–was no longer actively involved in running the label.

The Newton-John case:

http://law.justia.com/cases/california/calapp3d/90/18.html

The Courtney Love case:    http://www.nyrock.com/worldbeat/02_2001/022801.asp

http://www.cmt.com/news/country-music/1448687/leann-rimes-courtney-love-don-henley-testify-on-artists-rights.jhtml

LeAnn Rimes, Courtney Love, Don Henley Testify on Artists’ Rights

September 6, 2001; Written by Teri vanHorn

LeAnn Rimes, Courtney Love and Don Henley went to California’s State Capitol Building Wednesday (Sept. 5) to complain about record-company business practices and ask for legislation to free musicians from long-term contracts.

“At 12, I was thrilled to sign my record contract with Curb Records, and at that age I didn’t understand everything that was in my contract,” Rimes told state senators. “I just turned 19 last month, and if I record at a rate of one album every two years, which is the industry average, I will be 35 before the contract is over.”

The hearing in Sacramento focused on a 14-year-old amendment that exempts recording artists from California labor laws meant to protect other entertainers.

The state’s so-called seven-year statute prevents companies from binding an entertainer to a contract for more than seven years. But recording artists lost that protection in 1987, when record companies secured the right to sue them for undelivered albums after seven years.

“In 1987, [record companies] snuck in, and you guys got snookered,” Love told lawmakers including Democratic state Sen. Kevin Murray, a former music agent who recently founded the Senate’s Select Committee on the Entertainment Industry. Murray organized a series of hearings to help him decide whether to try to repeal the amendment.

Love, lead singer for the rock band Hole, said touring requirements, coupled with the time it takes to write and record an album, make the standard record contract impossible to fulfill. “I don’t care what the [industry] says to you today; they lied to you,” she said. “I cannot make seven albums in seven years. They will not let me.”

“Record companies can fire us, but we can’t fire them, even if they fail to perform their duties,” said Henley, the Eagles singer and drummer who last year co-founded the Recording Artists Coalition with Sheryl Crow to lobby for artists’ rights.

Cary Sherman, senior vice president of the Recording Industry Association of America, which represents record companies, said labels take massive financial risks and endure the failure of 90 percent of their acts. He said the amendment provides needed protection for the labels, and the only artists affected by it are superstars.

Asked to comment specifically on Rimes’ claims about her contract, which includes a stipulation that she can reside only in Tennessee or Texas, Sherman said her situation appeared to be an anomaly. A representative at Curb could not be reached for immediate comment.

The inquiry into record-industry customs comes in the wake of lawsuits against major labels by artists such as Love and the Dixie Chicks. All three members of the Dixie Chicks attended the hearing but did not testify. Don Engel, who represents the group, told the panel that keeping artists under contract for an indefinite period prevents them from discovering their true market value. “Once every seven years,” he said, “an artist should be able to go into the marketplace and get his full worth.”

R&B singer Patti Austin, artist manager Jim Guerinot, whose clients include No Doubt and the Offspring, and Michael Greene, CEO of the National Academy of Recording Arts and Sciences, also testified against the amendment.

Much of the discussion strayed from the core issue of the seven-year statute, partially because the lawmakers were grappling to understand how the music industry works. Love and Henley handed out books about the industry to senators so they could study up for the next hearing.

Love, sporting a new brown hairdo and a demure dark dress with a round white collar, began her testimony by claiming that music-industry reform could prove profitable for California.

“I’ve made more for Universal than Titanic, ” she claimed. “And are they even nice to me? No, they’re rude!”

The 30 seconds to Mars case:

http://articles.latimes.com/2009/nov/29/entertainment/la-ca-30-seconds-to-mars29-2009nov29

“Gimme’ A Break” A musical artist, under certain circumstances, can break
an existing recording agreement:

http://www.benmclane.com/BreakCon.htm

http://www.billboard.com/articles/news/74987/labels-accounting-practices-under-fire

http://news.dmusic.com/print/5767

This entry was posted in Michael Jackson - RTs and Incs and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

4 Responses to Michael Jackson, Captain EO and the business of conquering the world- Part 6 – “Unfree Masters”

  1. Terrific article! I am posting a link to it under Michael Jackson Study Articles For Research. Keep up the good work!

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