BMG Breaks Ranks

This sounds like the tobacco companies, or maybe the baseball owners: united in their front until someone gets greedy or scared, in this case scared:

Bertelsmann Music Group today will launch what the company calls a “fairer, more transparent” accounting system for royalty payments, a move that artist representatives say could ease the controversy over whether performers are being cheated by their labels.

BMG, home to such acts as Carlos Santana, OutKast and Britney Spears, is the first major music company to scrap contract deductions that artists say obfuscate their earnings. The action comes as lawmakers in California and New York have begun to scrutinize complaints from pop stars about questionable accounting practices in the industry.

“One reason this industry has ended up with such a bad image is because we could not look a guy in the eye and tell him, as a partner, that the contract he was about to sign was fair,” said BMG Chairman Rolf Schmidt-Holtz. “This is the first step in a larger plan by BMG to redefine our partnership with artists.”

In the years ahead, BMG plans to introduce a new contract model under which the company would control an act’s recording career for fewer years but share in a series of new revenue streams, including concert proceeds and sponsorship and film deals. BMG already is designing a new agreement that is expected to reduce the number of pages in a standard contract from 100 to 12.

Initially, BMG’s royalty revisions are not expected to result in higher royalty payments to artists. But BMG executives say the new plan will simplify royalty computations, making it easier for artists to determine what they are owed. [from LA Times]

I love this line, from the Chairman of BMG!

“we could not look a guy in the eye and tell him, as a partner, that the contract he was about to sign was fair”

Talk about the Emperor looking in the mirror and declaring himself naked. If you are waiting for the other shoe to drop, though, it already has – note this bit: “the company would control an act’s recording career for fewer years but share in a series of new revenue streams, including concert proceeds and sponsorship and film deals.” These revenue areas have heretofore been sacrosanct for the artists. With revenue from traditional recordings so up in the air right now, it makes perfect business sense for the labels to squeeze into more reliable revenue sources like live performance and film.