An important chapter in the legal history of the music business may be coming to conclusion soon as Universal Music Group is close to submitting a settlement resolving claims that it cheated recording artists of royalties from digital downloads.
The putative class action from artists including Chuck D. of Public Enemy, Rick James (by way of trust), Dave Mason of Traffic, Whitesnake, Andres Titus of Black Sheep, Ron Tyson of The Temptations, among others, alleges that record labels should be treating digital download income off of venues like Apple’s iTunes as “licenses” rather than “sales.” By accounting the other way, the artists get about 15 percent of collected income rather than 50 percent they allege is due.
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The monetary value of UMG’s coming settlement haven’t yet been disclosed, but The Hollywood Reporter has learned that it will likely cover EMI, which was acquired by UMG in 2012 and has been dealing with its own litigation on the digital download front. Following settlements by Warner Music and Sony, UMG’s deal if approved would mean that all of the record majors have resolved claims following the 2010 appellate ruling in F.B.T. Productions v. Aftermath — dealing with Eminem songs — which suggested that “licenses” rather than “sales” were the more appropriate accounting treatment in an era where record labels no longer spend huge amounts on packaging physical CDs.
According to sales data released this week by the RIAA, digital downloads is the top revenue producer in the music industry. Download sales are at $2.64 billion, which beats physical music sales of $2.27 billion.
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As streaming gets closer to dominating downloads, the litigation may shift likewise as well.
The digital downloads cases may be on the precipices of conclusion, but scrutiny may follow as to whether record labels are cheating artists on money collected from outlets like Spotify. For instance, on Tuesday, a judge refused to reject claimsthat Sony breached agreements and good faith dealing with 19 Recordings — the label of former American Idol contestants Kelly Clarkson, Carrie Underwood and Jordin Sparks — by allegedly mischaracterizing income from streaming services as as “sales” or “distributions” rather than as “broadcasts” or “transmissions.”
Link to the rest at Billboard
Starting several years ago, PG blogged about this issue before in the context of book publishing agreements. For a great many years, standard publishing contracts included royalty provisions that paid a much lower royalty for books that were sold than for books that were licensed.
PG hasn’t surveyed Terms & Conditions for online ebook sellers for a long time, but the last time he did, the major online retailers all said something to the effect that the publishers were licensing ebooks to readers, not selling them.
Kindle Content is licensed, not sold, to you by the Content Provider.
If you pull up a publishing contract that’s more than ten years old and search for the royalty rates payable when the publisher licenses the book, you may well find that, like the music business, Big Publishing paid much higher royalties for licenses than it did for sales.