Forget Infringement, Major Labels Should Be Worrying About Having To Pay Much Higher Royalties On Downloads
from the well,-look-at-that... dept
For a few years now, we’ve followed the lawsuit between Eminem and Universal Music concerning digital royalties. The basics are that the record labels offer incredibly low royalties on sales of music media, such as CDs. However, when it came to “licensing” music (generally for movies or commercials or whatever), it offered a much higher payout to the artist. This made some amount of sense under traditional label thinking, since selling product actually involved a fair amount of costs and work. But licensing a song for a movie was pretty simple.
So, the question that Eminem (and some other artists in other lawsuits) asked was: what is iTunes? Is it a “sale” like a CD, thus entitling the artist to low royalties? Or is it a “license,” like for a commercial, entitling him to 50% royalties? Reasonable arguments can be made on both sides, and since the recording industry has a habit of a quantum-like switching where it pretends that something is a sale when it wants it to be a sale, but then insists it’s just a “license” when that’s beneficial, it felt pretty good about its chances in the lawsuit. And while Universal Music won at the district court, the appeals court went the other way, and said that iTunes represents a license.
And, now, the Supreme Court has refused to hear the appeal, meaning that this ruling lives on in the all important 9th Circuit. It’s possible that some other similar cases may come out with a different ruling in a different circuit, greatly increasing the likelihood that the Supreme Court steps in, but for now, it seems that the courts are saying iTunes is a license not a sale. While more recent contracts have been written to avoid this problem, it does seem like there are a lot of legacy contracts out there (which are tied to a lot of ongoing revenue via the back catalogs for the major labels) where this could be an issue. In other words, the record labels may owe a ton of money to artists.
And they still think infringement is the biggest challenge they face?