From Forbes blogs:
The dispute between artists and labels over the income earned from digital downloads continues to rage.
Traditionally, record labels sold physical copies of music mediums, like CDs, and then would pay a royalty to the artist for each record sold. When iTunes came on the scene in 2001, the labels treated the sales of digital downloads the same as sales of physical CDs, and ever since have paid the artist a royalty on sales of those digital downloads. However, labels actually license the master recordings to digital distributors like iTunes and after a while artists began to make the argument that the income earned from digital downloads should be treated as licensing income and not sales income. The reason why artists want downloads to be treated as licensing income is because instead of getting a small percentage for a sales royalty (most commonly ranging from 11-20%, with an average of about 15% of the wholesale purchase price), licensing income is usually split 50-50 between the label and the artist. Therefore, artists stand to make a lot more money in royalties if a digital download is treated as a license rather than a sale.
This issue came to court starting in 2007 with the case FBT Productions v. Aftermath Records, a case involving royalties paid on Eminem recordings at the “sales” rate rather than the “licensing” rate. FBT won the lawsuit, establishing that income from digital downloads should be treated as licensing income rather than sales income, but Universal Music Group (owner of Aftermath Records) argued that this case should not set a precedent for all artist or record deals.
. . . .
The Carpenters. Surviving member Richard Carpenter (fighting on behalf of his sister Karen Carpenter’s estate, as well) audited the band’s label, A&M Records/Universal Music. Artists often audit record label books to make sure that they are getting paid the proper royalties. Richard Carpenter’s audit showed that the label was under-reporting the number of downloads sold, was calculating the royalty on those downloads at a lower base price than they were supposed to, and that the label was paying a royalty on digital downloads at the sales rate instead of the licensing rate. Apparently, attempts to resolve the issue amicably were unsuccessful, and thus Richard Carpenter sued.
The Carpenters’ suit cites the FBT case as a precedent, and if the court follows FBT’s ruling then Carpenter has a good chance of success.
Link to the rest at Forbes blogs
PG has written about the sales vs. licensing royalties issue several times. If you search TPV using the key word, Eminem, you’ll find several posts.
Funny how ebooks are already considered to be “licensed” rather than “owned”. And unlike iTunes music, they still have DRM on them so they can be taken away at any time by the store going out of business or simply deciding you broke their terms of service.
Great, now that headline has Sisters of Mercy’s Under the Gun stuck in my head.
…Which, if Andrew Eldritch ever audits and starts his own lawsuit, will be hilarious.
I’m not a lawyer, nor do I portray one on television or in bars, but isn’t that how common law is supposed to work? Cases setting precedent?
The schoolyard bully gets a taste of his own medicine from what he thought was a weakling and declares, “This don’t mean nothin’!” as he limps away …
Their lawyers can ‘say’ whatever they want, but it don’t make it so before a judge.
(And they said it in the hopes that others they’ve wronged don’t all come after them now that it looks like there’s a better chance of winning in court.)
Whale math, they be whales so they want to keep it all, you get what comes out under the tail. Or those ‘deep discounted’ books.