Labels Agree To $50 Million Payout

As expected, the five major labels and the Harry Fox Agency have entered into a se

As expected, the five major labels and the Harry Fox Agency have entered into a settlement agreement with the New York State Attorney General's office to pay $50 million in unclaimed recording and publishing royalties to thousands of artists.

Under the agreement, the labels have already disbursed more than $25 million to the artists; an additional $25 million is expected to be distributed.Individual payouts to artists range from hundreds of dollars to over $200,000.

In one of the biggest known payouts, the estate of Tommy Edwards, an R&B artist from the late 1950s, will get a check for about $220,000 as part of the settlement.

The settlement is the result of a two-year investigation by State Attorney General Eliot Spitzer that found many artists and writers were not being paid royalties. "While $50 million to the recording companies is not a big sum of money, $50 million to the artists who have earned these royalties can be a vast sum of money," Spitzer said at a press conference announcing the settlement.

Spitzer says the record companies and Harry Fox had failed to maintain contact with the artists or their estates and had stopped making required payments. He added that the problem was primarily one of not maintaining accurate contact information, and did not involve disagreement over the terms of recording contracts or the amount of royalty payments.

Under terms of the deal, the majors and Harry Fox have agreed to list the names of artists and songwriters owed royalty payments on company Web sites and post advertisements in music-industry publications explaining procedures for claiming the royalties.

Many of these practices are underway, label sources say.

The companies will also work with artist groups to locate performers who have not received or collected royalties, share artist contact information with other labels and hold regular meetings between the heads of the labels' royalty accounting and legal departments to review the status of royalty accounts.

The labels have also agreed to comply with New York State's abandoned property law. The law requires that if an artist or his or her family cannot be found, unclaimed royalties will be turned over to the state. The state holds the funds until a claim is made.

Sources familiar with the situation say that royalties not collected after a three to five year period will be turned over to the state. Spitzer maintains that the state is not looking to take control of these funds. "We want every penny of this money to be returned to the artist," he says.

Artists receiving funds range from obscure artists to well-known acts including David Bowie, Dolly Parton, Harry Belafonte, Liza Minnelli, Dave Matthews, Sean "P. Diddy" Combs and Gloria Estefan.

Spitzer said that he hopes to pursue additional settlements with other labels "in due course." No timeframe was disclosed.

L. Londell McMillan of the Artist Empowerment Coalition -- also a leading artist attorney who clients include Prince -- called the settlement "an important step toward bringing attention to a long standing problem."

He says labels need to improve their systems for keeping track of artists. McMillan estimates that the actual amount the recording industry owes artists in unpaid royalties is "five to 10 times" greater than the amount of the announced settlement.

In prepared separate but similar statements, the majors each pointed out that unclaimed royalties play only a small part in the percentage of royalties paid out to artists annually -- about 1%.

They also pointed out that despite devoting what one major termed "considerable resources and manpower" to locating missing royalty participants, there are still a small number of artists and other payees who they are unable to reach.