by Olivia Brown, FMC Communications Intern

Last month, singer-songwriter James Taylor joined the long line of legacy acts that have sued their former record labels for withholding royalty payments, among other financial oversights. According to a 2007 audit, Warner Bros. Records underpaid Taylor by nearly $1,700,000 between the years of 2004 and 2007.

This kind of financial dispute is hardly new.  The Temptations and Sister Sledge filed similar complaints (against Warner and Universal Music Group, respectively) earlier this year. The debate about whether artists should receive compensation as a “sale” or “license” for digital downloads has also garnered attention as a result of Eminem’s audit of his former label, Aftermath Records, wherein he argued that he should have been paid his licensing royalty rate of 50 percent — instead of his sales royalty rate of 12 percent — for digital downloads in the early days of iTunes.

The boilerplate-heavy contracts of the 1970’s are far removed from current-day agreements; lately, industry has been trending toward “360 deals,” which incorporate additional revenue streams such as touring and merchandise and vary greatly from artist to artist.  But these older contracts have lasting effects for formerly signed artists. The old contract terms still apply to recordings that Taylor inked with Warner Bros., and since this contract was drafted in the pre-internet era,  issues surrounding digital sales can get particularly heated. While artists who are still under contract with their pre-internet record deals can try to renegotiate their contracts to reflect new means of distribution, it is obviously more difficult for artists to negotiate with a label to which they are no longer signed.

In 2001, FMC released a critique of major label contracts . While the terms of the contract that FMC dissected are not necessarily reflective of the new 360 deal standards, they are still representative of the sorts of clauses that cause problems for legacy acts like Taylor. Contracts have evolved over the years, but older acts in particular still need to be vigilant when it comes to holding their former labels to modern compensation standards. The fact that some labels are still trying to avoid or argue their way out of royalty payments due to widely popular legacy acts — while not necessarily reflective of their current practices — doesn’t provide a particularly trustworthy impression to artists and consumers. Audiences that are predisposed to view the major label system as predatory will latch on to stories like Taylor’s as justification for their views.  

If the majors want to take a proactive step towards fixing their tarnished reputation with fans and artists alike, perhaps they should make a better effort to prevent royalty disputes with high-profile former signees by willingly applying new digital music royalty practices retroactively. At best, it would save them some face in a music community that is increasingly critical of the major labels. At the very least, it would save them some legal fees.