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 @ 9:12am

    What's the problem with charging the artist for legal fees you incur defending against lawsuits filed by the artist for not paying the artist?

    Lets compare this to a similar situation, to show Universal Music's point.

    -Universal Music hires you as an employee paid at the end of each month, with a $120,000 dollars a year salary.

    -At the end of the month Universal Music pays you only $4,000 before taxes, not the $10,000 you were expecting, so you sue Universal Music.

    -As the lawsuit continues you continue working for Universal music for an entire year, getting paid $4,000 dollars each month

    -You win an expensive lawsuit against Universal Music, so Universal Music gives you an accounting statement saying you're owed $72,000 in back salary. But Universal's statement also says it cost them $60,000 to defend against your lawsuit (and that's not counting the $20,000 you spent on your own lawyer in that lawsuit), so Universal writes you a check for $12,000 and calls it even.

    You see, perfectly reasonable of Universal Music! It's also a darn convenient way to get around pesky minimum wage laws, thanks to a little bit of creativity. Creativity is good! If we punish Universal Music for their creativity then the artists Universal Music represents won't be motivated to create new music!

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