WMG AGREES TO ROYALTY REFORM

Warner Music Group officials, meeting with legislators in Sacramento, have agreed to an overhaul of its royalty accounting process, according to the L.A. Times.

The company now joins UMG and BMG, who announced similar changes in November, leaving only Sony Music and EMI Group as holdouts among the Big Five.

The action comes as California lawmakers address a bill that takes on questionable accounting practices in the music industry, introduced by state Sen. Kevin Murray after last year’s hearings, in which Don Henley, the Dixie Chicks, Sam Moore and other stars testified that labels underpaid royalties.

Warner executives promised legislators from both parties to implement accounting practice changes that will put "teeth" into its commitment to reporting accurate royalties.

Warner's revisions, which will result in a new, shortened contract for its artist signings, aren't expected to increase royalty rates. But they will simplify royalty calculations and make it easier for acts to determine what they are owed, which could put more money in artists' pockets.

The company has agreed to stop computing royalties based on the suggested retail price of a CD and begin paying artists a percentage of the wholesale price actually received from retailers. In addition, the new contract would eliminate outdated provisions such as a 25% "container" deduction and a 25% "new media" deduction.

AOLTW said it would also provide auditors access to all manufacturing documents—not merely accountings of CDs sold. Record labels had previously refused to allow artists to see such records, limiting audits to royalty statements.

Warner is promising to pay interest at prime rates to artists on any unpaid royalties revealed in an audit. It will reimburse acts for costs of any audit that reveals under-crediting of royalties exceeding 10%.

The company also plans to pay artists a higher royalty for songs downloaded online, while scrapping outdated methods for calculating Internet sales.