State Attorney General Eliot Spitzer announced a deal on May 4 with the nation’s top recording companies that returns nearly $50 million in unclaimed royalties to thousands of performers.

The agreement comes after a two-year investigation by Spitzer’s office found that many artists and writers were not being paid royalties because record companies had failed to maintain contact with the performers and had stopped making required payments. This problem affected both star entertainers with numerous hit recordings and obscure musicians who may have had only one recording.

“As a result of this agreement, new procedures will be adopted to ensure that the artists and their descendants will receive the compensation to which they are entitled,” Spitzer said.

Under the deal, the recording companies have agreed to do the following:

• List the names of artists and writers who are owed royalty payments on company Web sites;
• Post advertisements in leading music industry publications explaining procedures for unclaimed royalties;
• Work with music industry groups and unions to locate artists who are owed royalty payments; and
• Share artists’ contact information with other record companies.

In addition, each company has agreed to have the heads of the royalty, accounting and legal departments meet regularly to review the status of royalty accounts and take steps to improve royalty payment procedures.

The companies have also agreed to comply with New York State’s Abandoned Property Law, which requires that if an artist or his or her family cannot be found, unclaimed royalties be “escheated” or turned over to the state. The state then holds these monies until a claim is made.

The participating companies include: SONY Music Entertainment; Sony ATV Music Publishing; Warner Music Group; UMG Recordings; Universal Music; EMI Music Publishing; EMI Music North America; BMG Songs; Careers-BMG Music Publishing; BMG Music and the Harry Fox Agency.

Spitzer also thanked music industry attorney Bob Donnelly, who originally brought the matter to the attention of his office and then helped identify ways to resolve it.

Prominent artists who were owed royalty payments included: David Bowie, Dolly Parton, Harry Belafonte, Liza Minnelli, Dave Matthews, Sean “P. Diddy” Combs and Gloria Estefan.

Spitzer noted that while royalty disputes are common in the entertainment industry, this particular problem did not involve disagreement over the terms of the recording contract or the amount of the royalty payment. Instead, it was a matter of the record companies not maintaining accurate contact information to mail royalty payments. Pursuant to the agreement, the companies will make a greater effort to locate and stay in touch with artists who are owed payments.

Spitzer said the recording companies had improved their efforts to find missing artists since the investigation began two years ago and that, collectively, the companies had already returned more than $25 million to those who were owed funds. An additional $25 million is expected to be distributed as part of the settlement.