Contract Dispute Greets New Head of Sony Music

Hot rock band Incubus is about to give new Sony Corp. music chief Andrew Lack his first taste of a conflict that has long bedeviled the music industry.

The Calabasas band, which has sold an estimated 7 million albums worldwide and emerged as a darling of the Sony roster, filed a lawsuit Thursday seeking free agency. The case ultimately could threaten to rip apart the basic contract structure underpinning the music business.

Band members Michael Einziger, Brandon Boyd, Jose Pasillas and Alex Katunich have been under contract to Sony’s Immortal Records since 1996. In an action filed in the Los Angeles County Superior Court’s Santa Monica branch, the four are asking a judge to rule that California labor law allows them to cease recording for Sony and cut a new deal.

The move comes amid a behind-the-scenes dispute in which Incubus has been trying to renegotiate an arrangement the band believes has paid them too little. Other performers, including Beck, Don Henley and Luther Vandross, have challenged their labels’ ability to hold them under contracts they viewed as unfavorable, only to reach out-of-court settlements that avoided a definitive legal showdown.

Rival executives say they are watching closely to see how Lack -- touted by Sony as an outsider with “fresh eyes” -- will deal with the kind of artist dispute that can deprive a company of a healthy return on its investment in a new act or leave it with an unhappy partner.

Lack, a longtime TV news executive, began running Sony’s giant music operation four days ago. He was named to the top post last month after the abrupt resignation of industry veteran Thomas D. Mottola.

In its first response to the suit, Sony appeared to tread softly. In a statement Thursday, the company said: “We have the highest regard for Incubus and their music and take great pride in the work we have done together to build a worldwide audience for them. Incubus is signed to an exclusive recording contract with Sony Music.”

Incubus has been managed since 1998 by Steve Rennie, a former Sony executive. Rennie declined to provide details on the band’s finances. But he said Incubus objected to the labels’ common practice of deducting such costs as packaging, video production and other fees from the artists’ cut.

“Under current standard industry practices, Sony Music has been handsomely rewarded financially during this period while the members of Incubus have received very little compensation from their creative and professional efforts,” Rennie said. The core question, he added, is whether Incubus “is entitled to share fairly in the fruits of their labor going forward.”

The Incubus action focuses on California’s so-called seven-year statute, which says most entertainers -- including film, TV and sports stars -- generally cannot be tied to any company for more than seven years. But major record labels have secured an amendment that treats musicians differently. It allows the labels to collect damages for undelivered albums, a prospect that has kept many music artists bound to their labels for much longer than seven years.

Sony and other labels have contended in previous disputes that they invest a fortune in developing and marketing artists and that long-term contracts are the only method they have for recouping those expenses.

For its part, Incubus is seeking permission from the court to invoke the seven-year limit and notify Sony that it has met all its obligations. The funk-metal band, which will reach the seven-year mark this summer, owes Sony four more albums under its current contract.

Should Incubus prevail in court, record executives say, Sony might respond by suing to collect damages for the undelivered albums -- a tactic the company took two years ago when country act the Dixie Chicks notified the conglomerate that it was terminating its contract.

A case over damages would trigger a debate about the industry’s accounting practices -- an outcome the major labels have tried to avoid.

To avoid testing the law, record firms have rewritten the contracts of some disgruntled stars, offering concessions in exchange for more albums. Record executives say artists often raise the specter of seven-year statute cases as a negotiating ploy.

Incubus representatives say the band has the financial muscle to handle a court battle. The band recently finished a 19-month world tour and ranked ninth on the list of the 10 most-attended tours last year. The band also recently signed on to play this summer’s Lollapalooza circuit.

With overall album sales cratering, “standard industry practices that have stood for decades are being examined in the light and context of today’s world,” Rennie said.

The band believes “very strongly that the financial arrangement between an artist and its record company needs to be part of that examination.”