As fans rush to record stores for their favorite stars' new CDs, some artists behind the music are getting themselves auditors to make sure they don't get shortchanged by their labels.
Many musicians and their managers are seeking outside help in challenging royalty formulas and contracts that they--and a few courts--have said are denying them their fair share of the profits.
Last month, shortly before her death, torch singer Peggy Lee and as many as 300 other performers obtained a proposed $4.75-million settlement in a class-action suit that accused their record company of cheating them out of royalties dating back to the 1940s.
Before Lee, the Ronettes, a '60s group, won a similar judgment, as did rock singer Meat Loaf, whose music label paid him an estimated $10 million to drop his royalty suit. Other stars claiming to have been shortchanged in royalties include the Dixie Chicks, Merle Haggard, Tom Petty, John Fogerty, Don Henley, Courtney Love, Tom Waits and the estates of Billie Holiday, Patsy Cline and Buddy Holly.
This week, as the annual Grammy Awards ceremony approaches, the war over royalties is intensifying. Tonight the Eagles, Sheryl Crow and a dozen other stars will take the stage at four sold-out benefit concerts organized by the Recording Artists Coalition to raise funds to lobby lawmakers for fairer record contracts and to clean up accounting practices.
The five major music conglomerates--Vivendi Universal, Sony, Bertelsmann, EMI and AOL Time Warner--say they pay artists accurate royalties based on time-honored industry accounting practices.
The recording labels say accounting errors have occurred unintentionally and that, on occasion, the companies have negotiated settlements simply to keep important artists happy.
Record companies say their royalty departments do not plot to cheat artists. They say they pay accurate royalties based on provisions in recording contracts, which each artist voluntarily signs. The companies contend that many of their differences with artists stem from interpretations of what the contracts specify.
"Most of the problems we detect are contractually permissible," said Nevada accountant Phil Ames, who has been performing royalty audits for three decades. "All of these artificial deductions are embedded in the contract."
Auditors at the dozen firms that specialize in this field say some record labels routinely fleece artists of millions in unpaid royalties.
