Eminem Loses Lawsuit Against Universal Music: Jury Says Digital Music Sales Are Like CD Sales

from the so-much-for-that-plan dept

Mon, Mar 9th 2009 6:21am — Mike Masnick

A few years back, a few bands, including Cheap Trick and the Allman Brothers sued their record labels claiming their cut of iTunes sales wasn't right. It was basically a contractual suit. Since there are a million and one different licenses to deal with, the record labels were treating digital sales the same way they treated CD sales -- of which the artists get a tiny tiny percentage. However, these bands noted that it seemed like digital sales was much more similar to a deal where they were licensing their music for use in another product -- such as a commercial or a movie. In those deals, the bands get a much bigger cut. A little while later, Eminem filed a similar lawsuit -- though somehow (great lawyers there...) thought that it was all Apple's fault and sued Apple. It looks like that got sorted out eventually, and Eminem refocused the lawsuit on Universal Music. And... didn't get very far. Last week a jury found that Universal Music was right: a digital sale is just like a physical sale, and thus the significantly lower royalty rate applies. You can bet pretty much every major record label just breathed a huge sigh of relief (even though an appeal is likely), because a ruling in the other direction would take away a hefty chunk of margin from their digital sales.

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Filed Under: digital sales, eminem, royalties
Companies: universal music

27 Comments

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Anonymous Coward, 9 Mar 2009 @ 6:41am

By that logic...
Piracy is then the equivellent of shoplifting. This raises the question as to why the penalities are so out of wack between the two activities.
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Anonymous Coward, 9 Mar 2009 @ 7:05am

My guess would be because, mainly, copyright issues are civil penalties, whereas shoplifting is criminal. In most instances civil crimes carry higher monetary penalties, but no possibility of jail. Criminal prosecutions carry jail time as well as monetary fines, so they are generally lower.
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David T, 9 Mar 2009 @ 7:11am

A matter of time?
Given the decline of CD sales and the ever increasing channels of digital distribution, I wonder how much longer middlemen will be able to trade on artist's fame.

Sooner or later people are going to recognize that the (ever diminishing)value labels add to the artist's work isn't worth the price.
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Anonymous Coward, 9 Mar 2009 @ 7:14am

The links do not do much, if I read them correctly, to inform a reader how the financials work...so it is hard to tell the difference in artist earnings under CD sales and under Digital sales. Any cite to a location that provides a more comprehensive breakdown?
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Anonymous Coward, 9 Mar 2009 @ 7:22am

Thank goodness! Now we can focus on stopping piracy to force digital sales to protect the artist's income.
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dkp, 9 Mar 2009 @ 7:29am

Re: A matter of time?
the problem is that the artists have to realize this and refuse to sign such contracts if they did this en mass then there would be real change real fast.
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Anonymous Coward, 9 Mar 2009 @ 7:42am

Re: Re: A matter of time?
Yeah, there will be bills requiring a license to play music. Think of the children.
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Anonymous Coward, 9 Mar 2009 @ 7:43am

Re:
Apparently under a un-cited ppt I have, distribution of Physical CD revenue is as follows:
9% Creators
46% Record Company
45% Retailers

Digital:
8% Creators
68% Record Company
15% Digital Service Provider
9% Credit Card Processing

Another article, originally cited from the book "Confessions of A Record Producer" has this breakdown for Physical CD sales:
$0.17 Musicians? unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

Sigh. WalMart gets paid more than the artist does in royalties.
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Anonymous Coward, 9 Mar 2009 @ 7:45am

OK, so if a digital sale is identical to a physical sale I can let anyone I want listen to my digital media right? And I can resell the digital media at whatever price I feel is fair correct? (First sale doctrine.)

Also if my digital media is not licensed why does it have a license agreement?
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R. Miles, 9 Mar 2009 @ 7:46am

Re: By that logic...
Piracy is then the equivellent of shoplifting.
The hell it is!
When someone shoplifts an item, it's GONE. No one else can get the item.

When someone COPIES an item, the original is still there for OTHERS to copy.

Understand this.

Whether or not you agree about music sharing, copying music is not stealing.
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Anonymous Coward, 9 Mar 2009 @ 8:16am

Re: Re: By that logic...
I was referring to a simplistic representation the leagal ramifications. If, according to the law, there is no difference between the physical media and the digital media, why then are the penalties different? When was the last time there were civil penalties for shoplifting?

It seems that the record companies want it BOTH ways.
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Anonymous Coward, 9 Mar 2009 @ 8:16am

Re: Re: By that logic...
Do you think they will be mad if I go into the store and make a copy of all their cds? I'll bring my own blank cds...
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Anonymous Coward, 9 Mar 2009 @ 8:18am

Re: Re: Re: By that logic...
Go to the library instead.
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R. Miles, 9 Mar 2009 @ 8:29am

Re: Re: Re: By that logic...
Yeah, my mistake. I got that after I hit submit and saw the "then" in the sentence.

Sometimes skimming isn't the best thing to do. ;)
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R. Miles, 9 Mar 2009 @ 8:32am

Re: Re: Re: By that logic...
Do you think they will be mad if I go into the store and make a copy of all their cds?
No, they won't be, because the moment you open them, you bought them.

By the way, do CD stores still exist? With a shrinking market, I would say those still in business are probably looking at extinction.
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Osno, 9 Mar 2009 @ 8:34am

UM once again protecting artists from pirates?
Easy solution: Eminem should not sell new records via Universal Music. CD sales are so not like digital sales. Most of the associated costs of the plastic discs are gone, and that should go to the label and the artist, not just the label.

Oh, and btw: happy 30th anniversary, CD!
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Osno, 9 Mar 2009 @ 8:36am

Re: Re: Re: By that logic...
They will be mad, they won't be right.
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Anonymous Coward, 9 Mar 2009 @ 8:47am

Re: Re: Re: By that logic...
ya, you ruined the seal on the CD case and they won't be able to sell it.
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Anonymous Coward, 9 Mar 2009 @ 8:59am

If CD sales are down that much, seems like a guy like Eminem has the cash on hand to set up his own file server. On his new album he could put them up on his file server and charge like $.75 per song and bypass the record labels altogether. Cut a deal with ITunes and whatever other digital distributor for $.99 per song and that way he doesn't even have to worry about royalties on physical media sales. He's plenty wealthy as it is and would make a perfect test case for bypassing D-bags like Universal for digital distribution.
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MAtt, 9 Mar 2009 @ 9:11am

Re: UM once again protecting artists from pirates?
Interesting idea. I would extend it to say that artists should begin to embrace the Internet and sponsor their own music on their own web sites, and forgo the traditional licensing practices which ball-and-gag their music from open distribution. Rich enough bands could very easily help the little guys (like popular local bands creating a local label for new artists; they can create a local web site).

Contrived commercial acts will always be around for record execs to exploit for the enjoyment of teenagers. "Real bands" should combine their efforts to overcome the radio-tv monopoly of the entrenched industry.
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Overcast, 9 Mar 2009 @ 10:07am

By the way, do CD stores still exist? With a shrinking market, I would say those still in business are probably looking at extinction.

Believe it or not a new one just opened up not too far from me - but they are selling other stuff, like T-Shirts, Posters, and such - they shouldn't have any issues staying in business with as much as my daughter begs me to buy more there.
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Anonymous Coward, 9 Mar 2009 @ 10:11am

I don't know why the labels are breathing a sigh of relief. This just means that it will be more attractive to contract with iTunes through a more direct channel. The main thing the major labels have now is promotion and influence over radio playlists. But the labels want radio broadcast to be labeled "piracy" and get paid for it. That means they will have less influence over the music that gets played as radio stations look for cheaper off-label record deals.

When will the labels stop trying to saw off the branch it is sitting on?
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crucible, 9 Mar 2009 @ 10:36am

RE: Eminem Loses Lawsuit
Piracy...is talentless paper pushers and layers making hundreds of millions of dollars off other peoples work and abilities. The record labels have had it too good for too long. God I hope to see the demise of these loser scumbag bastards.
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Anonymous Coward, 9 Mar 2009 @ 11:29am

Re: Re: Re: Re: By that logic...
Depends on the store, doesn't it? Because if they've got desktops set up to play with..? Well, wouldn't be the first time I've seen someone making a disc-to-disc copy in a store.
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incubus lyrics, 10 Mar 2009 @ 2:13am

Well, you can take it this way, piracy is for people who doesn't care about the hard work of an artist and they only think about themselves.
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Jaysen, 14 Dec 2009 @ 8:28am

Music Lawsuits.
It's an unfortunately thing when an artist does all the hardwork and others get all the profit, but that seems to be the way of the business these days. Interestingly, lawsuits are now moving onto merchandising of artists - http://bit.ly/5v1VvL
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Brian Ballard, 1 May 2011 @ 2:06pm

Music Lawsuits
Don't ever sign with a major label. The will cheat you out of your royalties.
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