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Universal Music to Redo Royalties

Firm becomes second to respond to concerns about the industry's accounting practices.

November 28, 2002|Chuck Philips | Times Staff Writer

Universal Music Group is planning to revamp its royalty accounting process, becoming the second major record corporation in less than a month to respond to artists' concerns about whether they are being shortchanged by their labels.

Universal executives declined to comment Wednesday. But sources said part of the royalty proposal goes even further than one introduced last week by Bertelsmann Music Group, which was aimed at eliminating outdated deductions to clarify the accounting process.

According to an internal memo, first reported Wednesday in the Wall Street Journal, Universal will now give auditors for artists access to manufacturing documents.

Record labels previously had barred artists from examining such records. Audits were limited to royalty statements only.

Various acts have accused their labels of selling albums manufactured overseas but not accounted for in royalty statements.

"Our contracts require us to pay artists on records sold, not manufactured, and we have always provided auditors with all necessary books and records to determine those sales," said the memo, dated Monday.

"However, it became clear to us that not making manufacturing records available is causing unnecessary suspicion and adding a negative perception," the memo said.

Other changes expected to go into effect at Universal, according to the memo, are:

* The size of the audit staff will be doubled, allowing the company to be more responsive to issues raised by artists.

* Royalty workshops will be held twice a year to help artists familiarize themselves with their royalty statements.

* A bevy of contract restrictions that hamper an artist's ability to audit a label's books and records will be waived.

"We are dedicated to building stronger ties and relationships with our artists, and, to that end, we have begun a series of meetings with major auditors to establish a dialogue in order to understand what we can do to improve our systems and the auditing process," the memo said.

"While there are undoubtedly times where there may be inadvertent errors in the [royalty] statement, we do our best to always ensure that our artists are paid accurately and in a timely fashion according to terms of their contracts," the memo continued. "In the overwhelming number of cases, we succeed."

The changes at Universal, like those at BMG, come as lawmakers in California and New York have begun to scrutinize complaints from recording artists about questionable accounting practices in the industry.

There also have been a number of lawsuits, including one recently settled by singer Courtney Love.

"After listening to outside auditors and testimony at legislative hearings, we have decided to initiate a number of changes in our royalty reporting process to make it more efficient, responsive and easier to understand," the Universal memo said.

Among Universal's top acts are Eminem, No Doubt and Jay-Z.

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