Court Refuses To Dismiss Allman Bros. Lawsuit Against UMG; iTunes Royalties At Stake

from the a-license-or-a-sale? dept

Thu, Sep 17th 2009 6:01pm — Mike Masnick

There have been a number of lawsuits over the past few years from artists who are complaining about how the major record labels account for iTunes sales. The question is whether or not a song sold on iTunes is the same as a CD sale (a tiny tiny royalty) or more like licensing a song for a commercial (more like a 50% royalty). Obviously, the record labels want iTunes treated like a CD. But musicians have a reasonable argument that an iTunes sale may be a lot more like a typical license, as a big part of the reason in the discrepancy in the royalty rates is that there's no (expensive) physical packaging and distribution to handle. The Allman Brothers were one of the first to file lawsuits on this issue suing both Sony Music, and then a couple years later, Universal Music Group (I'm still not clear why they sued the two separately, years apart). Eminem also had sued UMG over this issue and lost, as a jury said iTunes was more like a CD sale.

UMG tried to get the case from the Allmans dismissed, but davebarnes alerts us to the news that the court has refused to dismiss the case, and it will proceed to a full trial. Of course, like Eminem, the Allmans may lose the trial, but it's better than having the case dismissed outright. Of course, if the Allmans win, it will create a bunch of similar lawsuits in short order, as pretty much every artist will be demanding a lot more iTunes revenue.

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Filed Under: allman brothers, itunes, licensing, royalties, sales
Companies: universal music

18 Comments

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Avatar28 (profile), 17 Sep 2009 @ 6:15pm

good and bad from this
On the one hand, I think the artists SHOULD be getting a lot more money from this. I know Weird Al said awhile back that, as tiny as their CD royalties are, he would earn several times as much from someone buying a CD as if they bought the album on iTunes.

So, what I see happening is the artists get more money, something like 50% of net revenues instead of the couple percent they get now. Now the labels want to charge $2 per track instead of $1 so that they earn the same amount. People say screw this and go back to pirating the music more than ever. The labels then go crying to congress demanding help and either A) try to force mandatory drm on, well, everything or B) a CD tax like canada on anything that can be used to store music. CDs, mp3 players, flash drives, hard drives, etc or C) a $5-10/mo tax assessed on every household or possibly x amount per GB of transfer.

But maybe I'm just being pessimistic.
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Anonymous Coward, 17 Sep 2009 @ 6:44pm

It's about time.
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AG (profile), 17 Sep 2009 @ 6:53pm

Re: good and bad from this
B) should would include computer operating systems too, since they can play music. So that would mean any open source OS would basically have to pay up or be considered illegal. What fun for the music inductry.
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Anonymous Coward, 17 Sep 2009 @ 7:01pm

Well, if the user agreement of the site you download the track from specifically states that you're purchasing a license for it, then wouldn't it just make sense that the royalties be determined that way?
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Anonymous Coward, 17 Sep 2009 @ 7:45pm

I think...
I think the RIAA should take up the banner on this issue for the "Artists" it is representing oh no wait, it's not about the artists on this issue it's the recording industry. I have a hard time keeping track.
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bigpicture, 17 Sep 2009 @ 8:53pm

Re: good and bad from this
So remind me again, what value does the recording companies add to the recording, promotion and distribution process? Why does either the fans or the artists need the recording companies now?
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griffyn, 17 Sep 2009 @ 9:55pm

gee, I wonder what will happen
if the artist wins the case... I bet my entire downloaded music collection that iTunes prices will rocket to make up for the sudden 'earnings loss' the labels will experience.
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CAS, 17 Sep 2009 @ 11:20pm

Re: Re: good and bad from this
That's exactly right bigpicture... since distribution has become so easy I hope that artists move to traditional PR firms.

One HUGE middle man is cut out and artists still make money because although the pie is smaller (theoretically and only according to the RIAA), they don't share as much anymore.

Yay for efficiency right?
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Frosty840, 17 Sep 2009 @ 11:31pm

The fact that artists aren't being given 50% of revenue is one of the main reasons I don't use any of the music download services at the moment.
The other is that "buying" that music doesn't actually mean that I own it...
Solve those two problems and I'll start getting interested in the deal.

In fairness to both sides, the problem here is that a download "sale" is neither the same as a traditional physical sale, nor the same as a licensing deal. It is dissimilar to a physical sale in that there is no production, storage or supply of physical goods. It is dissimilar to a licensing deal in that a licensing deal will generally be part of a marketing deal, to promote the song, or to promote goods by using the song, whereas a downloadable product release still requires a traditional marketing effort (in the case of those albums that actually receive one, at any rate).

I'd guess, but haven't researched, that the Eminem judgement came down to there only being two remuneration deals in the artist's contract, and that the download "sale" was more similar to an album sale than a licencing agreement (the fact that a download "sale" is a licensing agreement, and not a sale notwithstanding).

As I say, I still won't be "buying" from any of the download services until my "purchase" becomes something more concrete and meaningful than the current hellspawned, DRM-laden mess that it would be currently.

Plus, I can still get hold a post-purchase-value-retaining physical copy of an album for less than the download price of the same music.
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bc (profile), 18 Sep 2009 @ 5:24am

This is very disappointing
IF they win this suit, they (artists) will once again choke off a tremendous avenue for exposure. I can't begin to think of the number of times someone has mentioned an artist I should check out, and I've gone to listen, and then purchased via iTunes. Or the number of times I have heard something on satellite - and then gone to iTunes to purchase and download.

The optimum scenario for artists is maximum exposure.

The optimum scenario for the recording industry is money.

BMI, ASCAP, and SESAC have already choked businesses playing music in public environments with their fees... do artists get a nice slice out of that?

The music industry was already crying about how the Internet killed radio, etc (not true at all). Along comes a company that brings MASSIVE and ... legal Internet exposure to the industry - and they want to kill it by extracting yet MORE money from the buyers.

Writers went on strike to get more money out of DVD sales... but they didn't do anything new or different to be compensated. They were already compensated for the writing. The company that took risk producing the DVD went out on a limb. They took great monetary risk to roll that movie out to the public. If it flops... where is the writer? Do they take a hit? Nope. They just collect more if the company's risk is successful. Nice position to be in.

The industry has pretty much choked new artist exposure in today's world via satellite and radio. I would think most artists would love that a larger audience can gain exposure to them via iTunes and the like.

If they double the price, that's when I will reach my tipping point. I no longer listen to commercial radio - because it's terrible. Short playlists, loaded with commercials... I suspect my college age daughter will do likewise. Stop buying. There are a lot of options in today's world. I'm getting tired of industry holding me hostage.

Did the Allman Brothers do anything new to gain this new source of revenue? Were they not already compensated by producing the music in the first place? Should photographers continue to get paid each time their photograph is used? (I am aware some are - but not the one's we hire). At what point does one get paid a fee for service, and that's the end of it?
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MCR, 18 Sep 2009 @ 6:57am

Re: This is very disappointing
This suit is more about contract interpretation. The artists are compensated differently depending on how the sale is classified (CD or license).

It does boil down to money, but I bet they don't see it as an increase to fans. They're probably assuming (incorrectly) the industry will absorb the loss, and not increase overall price.
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AC's long lost brother, 18 Sep 2009 @ 7:05am

Re: This is very disappointing
Were they not already compensated by producing the music in the first place?
Um, NO. They probably have a contract that states something to the effect that they make some percent of CD sales (usually in single digits) and some larger percentage (usually as much as 50%) on licensing deals. To use your photographer analogy: You hire the photog to take a picture that you use in promotional materials like brochures, that is like the licensing deal, so it is a larger amount of money for a one time sale. Let's say you also sell snapshots or postcards of the photographers work, this is like the CD sales.
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hegemon13, 18 Sep 2009 @ 7:20am

Neither one fits
It sounds to me that they have a square peg that the record label tries to jam into a round hole where the artist are trying to cram it into a triangle one. In the end, it sounds like they just need to negotiate a separate license that actually fits digital distribution. Hmm, perhaps a "digital distribution" license.
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Chronno S. Trigger (profile), 18 Sep 2009 @ 7:32am

Re:
Well that makes sense to me. Especially since, according to the RIAA, when you purchase a song from iTunes or even on CD, you aren't getting the song you're getting the license to play the song.
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chris (profile), 18 Sep 2009 @ 8:15am

Re: good and bad from this
A) try to force mandatory drm on, well, everything or B) a CD tax like canada on anything that can be used to store music. CDs, mp3 players, flash drives, hard drives, etc or C) a $5-10/mo tax assessed on every household or possibly x amount per GB of transfer.

or d) institute a VOLUNTARY blanket license that allows consumers to acquire media in any fashion that they desire for non-commercial use completely legally so long as their license is current.

licenses are sold annually or monthly and the funds collected are distributed to labels, ascap, and all the other royalty groups.

media companies can continue to snoop peer to peer networks looking for people to sue, but now they must prove that the defendant did not have a valid license at the time of the alleged infringement. the labels and studios can continue to screw artists just like they always have, and i can continue to download everything i want from bit torrent, only now i don't have to deal with private trackers, run blocklist tools and tunnel my traffic because file sharing is legal as long as you have a license to do so. this will mean faster transfers, more seeders, and a more active file sharing community.

since the blanket license is voluntary, people who buy hard drives or blank CD's don't have to pay taxes, people who buy CDs or stuff from itunes can continue to do so unimpeded, and the underground and warez scene types can keep doing what they do.

i call this the piracy pass. i keep doing what i do, they keep doing what they do, and i pay for the convenience of being able to do my thing in the open.
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Ben Zayb, 18 Sep 2009 @ 11:20pm

Re: Re: good and bad from this
"B) should would include computer operating systems too, since they can play music."

No.

Operating systems, by themselves don't play music. It's the programs running on top of operating systems that do the playing.

And no.

Taxes in B cover storage media not computer applications that actually use what's stored.
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Erik Higa, 26 Sep 2009 @ 5:55pm

I'm gonna sue the RIAA too. The music industry is messed up. It isn't about what people want to hear or what is agreed upon as the best music when it comes to the record companies that the RIAA represents. It's all about marketing and creating an image that young people will be attracted to. Record companies aren't looking for great artists. What they are doing has nothing to do with creating great art at all. The RIAA has no real interest in art other than the fact that they can exploit it and sell it.
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Hephaestus (profile), 1 Oct 2009 @ 6:47am

If this Lawsuit by the Allman Bros is a won ....
If this Lawsuit by the Allman Bros is won, its basically the death of the record companies. As CD sales tank further and more and more music is downloaded digitally a 50% hit will prevent further funding to RIAA. Yes it is understood this 50% hit wont happen overnight but it will happen eventually. The only thing the recording industry will be able to do is increase prices on the digital sales. The unintended side effect of raising the prices ($2 USD per song anyone) will be more piracy and more people moving to lesser know artists.

Go Allman Bros Go !!!!
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