36 Ways to Screw George Gershwin, by Warner Bros. Music…

Last year, we detailed the 52 different ways that Warner Bros. Records had screwed James Taylor, based on a detailed lawsuit from the singer.  But it looks like these tricks extend to other artists in the Warner Music family as well, including those as timeless as George Gershwin.

Of course, Gershwin passed in 1937, but the relationship between publisher Warner Bros. Music (including Warner/Chappell) and Gershwin’s heirs stretches back more than 75 years.

The more recent period of that relationship has been extremely rocky, to say the least.  In a recently-filed lawsuit in the Supreme Court of New York, the Gershwin Trust alleges that Warner bilked them of roughly $4.5 million, though a non-stop game of fiscal fudgery and under-reporting.  Overall, attorneys for the Gershwin Trust are seeking damages north of $15 million.

And with that, these are the many ways in which Warner Bros. Music, Warner/Chappell Music, and Warner Music Group screwed George Gershwin, according to the lawsuit…

(1) On April 18th, 2007, the Gershwin estate (or ‘GG Parties’) initiated a financial audit dating back to January 1, 2001, though auditing firm Premier Media, LLC.  The audit ultimately found underpayments of $4,469,612.07.

(2) During that process, the Gershwin auditor was repeatedly unable to secure the proper documentation, and therefore was forced to estimate certain figures and shortfalls in its initial report on October 10, 2008.

“In many cases the Initial Report was based upon assumptions and extrapolations necessitated by the Defendants’ continued failure to supply all of the required information for Premiere’s review, notwithstanding numerous requests for same and notwithstanding the Defendants fiduciary and contractual obligations with regard thereto.”

(3) In matters of foreign licensing, rentals, and distribution, Warner Music Group frequently permitted affiliated foreign companies to retain excessive and unnecessary fees.

(4) In some cases, Warner authorized non-affiliated agents to rent music and orchestrations and deduct fees beyond those permitted in the agreement.  “Although such sub-licensing arrangements were financially beneficial to [Warner] and their affiliated companies, the ultimate royalties and profits paid over to [Gershwin Trust] were significantly diluted by such practice,” the lawsuit read.

(5) On October 10, 2010, roughly three years after the inquiry, Warner Bros. Music supplied “some, but not all” details related to transactions and payments on Foreign Rentals, Ballet Licensing and Concert Grand Rights Licensing.  There was absolutely no documentation to back these figures.

(6) Moreover, Warner failed to offer any documentation related to its PRO registrations, despite repeatedly asserting that all registrations had occurred in a timely fashion.  “To date, [Warner Bros. has] failed to provide any source documentation supporting this blanket assertion,” the complaint continues.

(7) By April 23rd, 2012, the Gershwin auditing firm released another report using additional information from Warner Bros., though substantial documentation remained missing.  “To date, much of the requested source documentation has still not been provided to Premiere,” the complaint asserts.

(8) In the report, Premiere asserted that Warner Bros. had failed to account for all rentals of orchestrations and parts for the compositions in numerous foreign territories.

(9) The audit further determined that Warner failed to account for all ballet licensing and concert grand rights licensing, both in the US and foreign territories.

(10) Warner Bros. repeatedly deducted improper administration fees in excess of those permitted by existing contractual agreements.

(11) Warner Bros. allowed excessive commissions by third-party sub-agents contracted by Warner (with potential profit-sharing at the expense of Gershwin).

(12) Warner further permitted excessive commissions by the affiliates and agents of those third-party sub-agents (with potential profit-sharing at the expense of Gershwin).

(13) Warner failed to obtain written authorization or approval for the rentals of the individual compositions in Porgy and Bess, not to mention other compositions that required similar approvals.  These approvals were stipulated in existing agreements between the parties.

(14) Warner further allowed the improper and unauthorized rental of more than three orchestrations of compositions for one performance, also in violation of agreements.

(15) Additionally, Warner rented compositions to various parties after March 31st, 2008, without authorization and following the termination of the agreement between the groups.

(16) On top of that, Warner did not properly account for the income it obtained from these unauthorized rentals.

(17) Warner is further accused of failing to register numerous arrangements “in a timely manner” with foreign performance rights organizations (or PROs).

(18) Beyond all of that, the auditing team discovered “various other areas of underpayment.”

(19) All in all, the audit of April 23rd, 2012 found $4,469,612.07 in non-payments.  But those amounts are merely a static figure.  “Interest continues to accrue on these defaults in payment under the Agreements,” the complaint alleges.

“As noted above, the review of the Defendants’ books and records revealed that the
Defendants have improperly permitted their own affiliated companies, and those of their agents,
in foreign territories to retain excessive and unnecessary sub-publishing and/or third-party sub-
agent fees in connection with the exploitation of the Compositions in foreign territories.” 

(20) With respect to a reported rental of Concerto in F in Italy during 2003, the audit found that Warner Bros. improperly allowed a 25% commission for Ricording Music Publishing SPA, on an initial payout of $1,903.27.

(21) On the same license, Warner/Chappell Italy then took a 15% commission, also beyond the limits of the agreement.

(22) Also on that same, Concerto in F license, Warner/Chappell US took another, 15% cut.

(23) The payment ultimately handed to the Gershwin estate, on the initial payment of $1,903.27 payment, was $994.44.

(24) On top of that, the payment was paid to Gershwin four years after the initial payment was rendered to Ricordi.

(25) Ultimately, the audit determined that the George Gershwin Family Trust only received 52 cents of every dollar remitted, with an aggregate commission of 47% of the “At-Source” receipts retained by Warner Bros. and their various foreign affiliates and sub-agents.

(26) Other, more extreme examples were cited, including an astounding 60% commission extracted by sub-licensor Leduc in France on the same composition, Concerto in F.  In that scenario, Warner/Chappell-France took another 15%, while Warner/Chappell US extracted another 10%.  “Approximately 30.6% of the actual ‘at-source’ payments made for rentals of Concerto in F in France in 2006 was ultimately paid to the GG Parties,” the complaint continued.

(27) In both cases, Warner was contractually obligated to pay the Gershwin Trust 80 percent of all ‘At-Source’ foreign receipts (not 47% or 30.6%).  “By permitting and authorizing such arrangements, the Defendants have not only breached their contractual obligations… but also placed their own self-interest ahead of the interests of the George Gershwin Family Trust,” the lawsuit continued.

(28) Furthermore, Warner Bros. did not pay any interest or fees on late payments, including those that stretched past four years.

(29) Warner further did not comply with ‘Most Favored Nations’ stipulations contained within the various agreements with the George Gershwin Family Trust.

(30) In quarterly royalty accounts sent to the Gershwin Trust, amounts were falsely identified as being received ‘At-Source’ in various foreign countries, when in actuality, these were not the amounts collected ‘At-Source’.

(31) Warner repeatedly failed to negotiate the best licensing deals in foreign territories, at the expense of the Gershwin Trust.

(32) Warner Bros. is further accused of repeatedly failing to oversee and monitor the activities of various affiliates and sub-agents, resulting in improper, missed or non-payments.

(33) Warner is accused of “abandoning” numerous, massive markets around the world, most notably Australia and Asia.

(34) Despite receiving the audit report on April 23rd, 2012, Warner has not offered a “substantive” response at all to the claims.

(35) On July 25th, 2012, attorneys for the George Gershwin Family Trust demanded a response to the audit within 30 days, but still did not receive a response.

(36) On November 21st, 2012, Warner finally responded to the audit, but “failed to cure or meaningfully
address the vast majority of the defaults and breaches set forth in the April 23, 2012 Report.”

18 Responses

  1. Zac Shaw

    Major record labels are indefensible, and the history of corruption goes back over a century to the start of the record business. When their business model relies primarily on exploitation and litigation, why would one expect anything else?

    We need to get over the idea that musicians are entitled to compulsory royalties just for granting people access to their music. We need to get over the idea that pop music needs to be a game of Russian roulette where 9 artists must be screwed for 1 to become insanely rich for a short period of time. We need to get over this idea that the record business is responsible for some of the greatest contributions to music — they were just trying to profit, any benefit to our culture was incidental and most credit is due to the musician that perservered in the face of gross exploitation to make artistically (rather than just financially) successful work.

    Folks, the old way sucked. Elvis has left the building. The ones who keep his business model alive are the ones who can’t cope with losing the mailbox money they accrue, can’t fathom how to make money without exploiting rights — bottom line, the losers are always the ones who refuse to change.

    • steveh

      “We need to get over the idea that musicians are entitled to compulsory royalties just for granting people access to their music.”

      You’re talking like an anti-copyright freetard here, bro.

      Your mask slipped a little, and what it reveals ain’t pretty…

      • Clara Bellino

        Thanks for pointing that out Jeff, isn’t it ironic that the same people who denounce the at times exploitation of artists by labels, use it to justify that artists should not count on being compensated through their copyrights?! Let’s see, they don’t think what some labels did was right, but, want to do the same thing? hmmm

          • steveh

            Yes Clara, it’s truly bizarre that people use the fact that record labels unfairly exploit the rights of artists to claim that artists should have no rights in the first place.

    • hippydog

      If you think our society is just going to completely forget about the entire copywrite industry, your crazy..

      Copywrite will go away around the same time we decide to go back to kings and queens and horses..

  2. milshi

    If your business goes down, make sure you earn good until the very end!

  3. zogg

    It seems that his is going from one sqeeky wheel to the next.

    If you can’t get them on one thing lets try another.

    The esatate must be running dry?

  4. Visitor

    So when do artists get to Audit The Pirate Bay, 4Shared, Filestube, Kick Ass Torrents, Etc…

    oh wait, artists don’t get contracts, payments or audit rights from those companies?

    maybe artists can audit YouTube? Ah, no… that doesn’t appear to be possible either…

    wow… progress… we’re going backwards…

  5. Will.i.aint

    Hey Paul, how come u have not covered this huge INVESTIGATIVE story in Village Voice, LA Weekly and 20 other major cities about the exploitation + stealing of artist’s CONTENT + their AD REVENUE by both MAKER STUDIOS and MACHINIMA?

    It seems right up your alley. Cause I respect that you are the people’s champion for Artists Rights, and not ripping off artists, and anti-piracy, etc. Maybe it’s because you haven’t seen the story, hard 2 believe. Maybe it’s because your boss Ken Hertz won’t let you report on it, cause he’s editing this website for only favorable stories to him like Vevo/Google. or maybe it’s because his two conies/ puppets that he installed at Maker Studios — Courtney Holt and Jeremy Welt — all THREE OF THEM DID NOTHING TO STOP THESE BAD BUSINESS PRACTICES (some illegal) by Maker Studios. We all know the hand that Hertz had in these matters. None of these schlumps did anything RIGHT or ETHICAL to try to stop the exploitation of video creators + artists by FORCING THEM TO WORK FOR MAKER STUDIOS FOR …”THE REST OF THEIR LIVES.” THIS IS SHAMEFUL AND DISGUSTING, PIGGY LAWYER BEHAVIOR. AND BY HOLT TOO, WHO IS COO OF MAKER AND COULD STOP OR DISCOURAGE THIS AT ANY TIME. IF HE DID, THEN HE SHOULD RESPOND AND SAY SO AND GO ON THE RECORD. BUT HE”S A PUPPET FOR HERTZ FOR MANY YEARS AND A “PLANT”, A “MOLE” IN ALL THE COMPANY”S HE PLACED IN BY HERTZ (Same as druggie/hooker boy Welt) SO I CAN”T IMAGINE THESE 3 YO-YO’s did anything but ENABLE the HORRID POLICIES WE”VE ALL READ ABOUT IN THIS STORY. For Chrissakes, they are holding HOSTAGE these artist’s Google Ad Sense accounts..when it’s Ad Revenue that THEIR SELF OWNED CONTENT GENERATED + CREATED (!) for Maker Studios and Machinima. And then Hertz allegedly uses his influence to both rip off and exploit artists (be it video content creators, songwriters like the old music biz execs, etc.) only to then leverage those exploitive relationships vis a vis MakerStudios>YouTube>Google (directly against the video artists), to then help his buddy Rio get more funding from..who?. . Google for the limping Vevo which certainly isn’t any kind of revolution except maybe from the last century when they launched online videos at VH1.com. Okay, let’s see who is ethical and has an honest conscience to go on the record. It looks bad for all 3 of these guys – Welt, Holt + Hertz – to be ‘party’ to de facto endorsing these sordid policies at Maker Studios. Espec their (MS + mentioned execs) OUTRIGHT STEALING AND HIJACKING OF ARTISTS MONEY THAT IS IN THE ARTISTS OWN PERSONAL GOOGLE AD SENSE ACCOUNTS. READ THE STORY FOR YOURSELF, IT”S SICKENING. AND WITH HERTZ IN THE LEGAL/VC MIX AT MAKER STUDIOS > AND PLACING HOLT (as COO) + WELT (as VP MARKETING but now gone to Hertz next parasitic ‘victim’ Sean Combs Revolt), THEY ALL HAVE SOME EXPLAINING TO DO. INSTEAD OF TRYING TO HIDE OUT AND ACT LIKE THEY HAVE NO ROLE IN THIS GROSS BUSINESS CONDUCT AGAINST SPIRIT OF ARTISTS EVERYWHERE. THEIRS IS EVEN A BIGGER AND WIDER SPREAD “SCREW JOB” AS YOUR ILLUSTRATIONS SHOW THAN EVEN IF 50 ARTISTS GOT STIFFED AT WARNER BROS. THIS IS GLOBAL FOR ALL CONTENT CREATORS AND CHANNELS AND ARTISTS.


  6. Mike

    On the one hand sure Warners Bros. violated their contract. On the other hand, were talking about “royalty payments” to the great great great NEPHEWS of George Gershwin. People who neither are direct descendants of Gershwin. People who have never had to work because they were fortunate enough to come out of the lucky vagina. People who themselves have not contributed in the slightest to amassing this fortune nor have benefited society in anyway. Boohoo, trust fund babies are fighting over royalty payments they dont deserve in the first place. Go get a job and earn your own living instead of sucking on your dead great great great uncles teet for over 75 years. Theyre not royalty so why do they deserve “royalty” payments? Hell even royalty doesnt deserve “royalty payments.” Originally, royalty payments were for 25 years, but over time lobbyists sponsored and supported by the likes of the Gershwins, but especially by Walt Disney and Sunny Bono, have extended royalty expiration to 75 or 100 years after the death of the original artist. Royalty payments are elitist and stagnate the flow of money. Furthermore, the people who receive these payments did not earn them on merrit but were born to the right family. America is not England and we dont need their classist, elitist, social darwinistic notions of royalty and nobility. It would be better if everyone started life on an even playing field if you ask me. Inheritence only perpetuates class division between the haves and have nots. Furthermore, due to these dumb royalty laws every artists is getting sued by everyother artist for sampling or borrowing from their work, which back in the day eveyone use to do. Imagine how many lawsuits Elvis wouldve had to contend with if the same laws were in place back then. Arguably he wouldnt have substantially less creative output, not to mention the wasted time and resources on having to appear in court. And thats part of the reason why music and movies in general suck today in comparison. Its partly due to whiney parasitic royalty payment demanding sue happy trust fund babies like the Gershwins.