“Record Companies Keep Lists of Works Exploited… for Which Royalties Have Not Been Paid”

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If you’re signed to a major label, you might want to look away.

This is from a class action lawsuit filed against the major labels in Canada, alleging non-payment of royalties on compilation releases.  The initial claim was filed in 2008 for $50 million, and ultimately settled this year for $45 million.  The defendant labels were found to be systematically releasing compilations for years without paying artists, while also keeping details lists of those uses and who they weren’t paying.

The practice has been referred to as “exploit now, pay later,” if at all, and it’s the latest example of ugly major label behavior to surface in writing. It also raises questions about similar practices happening right now at Universal and other majors.  “These lists have accumulated over 300,000 works for which no license has been obtained, and no compensation has been paid to the class members,” the filing detailed.  The action was led by the estate of Chet Baker, and ultimately cost Universal Music Group a $14.4 million share of the settlement (not including legal costs).

If that part sounds depressing, this part might make you laugh.  Just this week, UMG filed a lawsuit against its insurance provider in Los Angeles Superior Court for not covering the Chet Baker liability.  In other words, UMG was found guilty of bilking its own artists, but had an insurance policy to protect against getting caught.  The defendant, National Union Fire Insurance Company, has refused to pay this ‘copyright claim,’ based on the criminal circumstances involved.

Actually, they’ve been refusing to pay the claim from the onset.  “After months of delay, National Union denied any and all coverage for the settlement, and, at all times, refused to pay any monies for the settlement based on its denial of coverage,” Universal stated. “Faced with National Union’s denial of coverage for the settlement and the massive copyright infringement damages claimed by the plaintiff class in the Baker Action, UMG entered into a class-wide settlement.”