Task: Consider the following portrayal of strategies employed by major recording studios:
Some recording artists and the Recording Artists’ Coalition claim that the world’s five major music recording studios-Universal, Sony, Time Warner, EMI/Virgin, and Bertelsmann- deliberately employ strategies calculated to take advantage of musicians who record for them. One practice to which they strenuously object is that the major-label record companies frequently require artists to sign contracts committing them to do six to eight albums, an obligation that some artists say can entail an indefinite term of indentured servitude. Further, it is claimed that audits routinely detect unpaid royalties to musicians under contract; according to one music industry attorney, record companies misreport and underpay artist royalties by 10 to 40 percent and are “intentionally fraudulent.” One music writer was recently quoted as saying the process was “an entrenched system whose prowess and conniving makes Enron look like amateur hour.” Royalty calculations are based on complex formulas that are paid only after artists pay for recording costs and other expenses and after any advances are covered by royalty earnings.
A Baffler magazine article outlined a hypothetical but typical record deal in which a promising young band is given a $250,000 royalty advance on a new album. The album subsequently sells 250,000 copies, earning $710,000 for the record company; but the band, after repaying the record company for $264,000 in expenses ranging from recording fees and video budgets to catering, wardrobe, and bus tour costs for promotional events related to the album, ends up $14,000 in the hole, owes the record company money, and is thus paid no royalties on any of the music. It is also standard practice in the music industry for recording studios to sidestep payola laws by hiring independent promoters to lobby and compensate radio stations for playing certain records. Record companies are often entitled to damages for undelivered albums if an artist leaves a recording studio for another label after seven years. Record companies also retain the copyrights in perpetuity on all music recorded under contract, a practice that artists claim is unfair. The Dixie Chicks, after a year-long feud with Sony over contract terms, ended up refusing to do another album; Sony sued for breach of contract, prompting a countersuit by the Dixie Chicks charging “systematic thievery” to cheat them out of royalties. The suits were settled out of court. One artist said, “ The record companies are like cartels.”
Recording studios defend their strategic practices by pointing out that fewer than 5 percent of the signed artists ever deliver a hit and that they lose money on albums that sell poorly. According to one study, only 1 of 244 contracts signed during 1994-1996 was negotiated without the artists being represented by legal counsel, and virtually all contracts renegotiated after a hit album added terms more favorable to the artist.
Q1. If you were a recording artist, would you be happy with some of the strategic practices of the recording studios? Would you feel comfortable signing a recording contract with studios engaging in any of the practices?
Q2. Which, if any, of the practices of the recording studios do you view as unethical?