Did Universal Music Try To Expense The Costs Of Eminem's Producers Suing Over Unpaid Royalties... Back To Eminem's Producers?

from the and-again-and-again dept

We were just discussing some of the details from Kenny Rogers' lawsuit against EMI/Capitol Records which showed the many, many ways in which record labels avoided paying artists what they were owed... and now some more details have leaked in the very similar (but further along) case concerning Eminem's royalties. You may recall that, back in 2010, Eminem's producers, FBT Productions, won its case against Universal Music, for the first time establishing that iTunes sales should be counted as licenses rather than sales. This was important, because sales get a royalty rate that's usually around 15%... but licenses get a royalty rate around 50%.

While Universal Music insisted that its deal with Eminem was unique and such a ruling wouldn't apply to most other artists, plenty of other artists have been suing their labels (like Kenny Rogers above), and estimates of upwards of $2 billion in back royalties that the labels may have to pay out.

The Eminem case is back at the district court as they try to sort out just how much FBT is owed, and Eriq Gardner, over at THResq, got his hands on one of the audit reports put together by an expert for FBT. It only shows a limited range of years (July 2005 to December 31, 2009), but also shows (similar to the Rogers lawsuit) how the report turns up all sorts of other areas where Universal likely underpaid FBT.
As you can see, the audit shows $3.8 million owed for the missing royalties from iTunes downloads. But also of interest? FBT claims that it never received a cut of the YouTube settlement money -- which many people had been wondering if it was ever going to go to the artists. Apparently not.

However, the most insane thing here may be the line at the bottom, in which it appears that Universal held back $2 million in a "legal hold." Gardner notes that this is money held back to pay for this very lawsuit. This is classic record label economics. Everything that you do that costs money, they charge against the artists' royalties. Order pizza at the recording studio? They charge that against your (small) cut of the royalties. Want to do extra promotions? Charge it against the royalties.

And... apparently, sue Universal music for withholding millions in royalties? It looks like they'll charge that against your royalties too...

Filed Under: eminem, licenses, royalties, sales
Companies: fbt productions, universal music


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  1. identicon
    Anonymous Coward, 24 Feb 2012 @ 9:35pm

    Re: Re: Re: Re:

    I must admit to not knowing what the law actually says about this... but it is morally indefensible to charge someone for your defense against their lawsuit. If Universal eventually wins the lawsuit, then it's up to the judge to grant lawyer fees or not. IF the judge does grant the fees, THEN it would be appropriate to do this withholding. But not before then.

    Imagine all employers doing this. Oh, you sued because you're being paid less than minimum wage? Here, we'll just deduct the costs of the lawsuit from your paycheck. Not our fault you didn't read that 8 page employment contract, right?

    Of course, in a sane universe, nobody would ever enter a contract with such a company ever again. We apparently do not live in a sane universe.

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