Record Labels May Owe Artists Close To $2 Billion; Lawsuits Ramp Up With Rick James In The Lead

from the i'm-rick-james... dept

Tue, Apr 5th 2011 9:04am — Mike Masnick

With the Supreme Court rejecting the appeal of Universal Music concerning how much it owes Eminem for iTunes sales, we expected a bunch of lawsuits to be filed, and that's starting. The estate of Rick James has filed a class action lawsuit on behalf of other artists who also believe that Universal incorrectly paid them for similar digital sales.

If you don't recall, the key question is whether or not digital "sales" are really "sales" or "licenses." That's because old record label contracts (the newer ones, not surprisingly, have been changed) gave artists a very small percentage of royalties on "sales," which was supposed to be about CDs, vinyl and tape, and a much higher percentage on "licenses," since there's not much involved in a license. Eminem and some other musicians have been suing the record labels pointing out that iTunes and ringtones appears to be a lot more like a license than a sale, and thus they should get the (much) higher royalty rates, and the appeals court agreed with Eminem. I'm not sure the status of some of the other lawsuits in this space, but with this new class action, I'm sure we'll be hearing about plenty of these lawsuits soon.

While Universal Music keeps insisting that the Eminiem contract was "unique" and had special language that makes the ruling only applicable to Eminem, clearly these other musicians do not agree. David Kusek has done some (ha ha) back of the iPad calculations to estimate the potential liability for the record labels at close to $2.15 billion.

Even if the estimates are a bit off, the record labels should be pretty worried about all of this. Of course, I can't wait until the next time they want to insist that they've really only "licensed" the music you have rather than "sold" it to you, since they were arguing exactly the opposite of that in court...

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Filed Under: contracts, licensing, rick james, sales
Companies: universal music

57 Comments

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Hephaestus (profile), 5 Apr 2011 @ 8:29am

Boned I Tell You, Totally Boned !!! We're all gonna die ... okay maybe just the labels ;)
No matter what happens in this case the record labels are boned. They win, they lose artists. They lose, they lose almost half their profits from online sales.

Time to revise my prediction of when the labels will fail downward again ... maybe I should just go with Thom Yorke's its "only a matter of time -- months rather than years -- before the music business establishment completely folds" and be done with it.
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duffmeister (profile), 5 Apr 2011 @ 8:49am

Did the artists all just have a Charlie Sheen moment? Winning, Duh!
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Ken (profile), 5 Apr 2011 @ 9:07am

This is just like artists not receiving money from RIAA lawsuits. If copyright holders have proven anything is they are a brood of selfish bastards.
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Donny (profile), 5 Apr 2011 @ 9:14am

The beauty of this is, the labels are damned if they win (because they lose a lot of control over their 'sold' mp3s), and damned if they lose (because they'll lose a lot of money over their controlled 'licenses').

Should I not be smirking? Heh.
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The eejit (profile), 5 Apr 2011 @ 9:28am

WHEN iPADS ATTACK!
Coming soon to the Discovery Channel, how an engraving on the back of Rick James' iPad killed off the recording industry.

And now, back to "Hitler was a Nazi, part 9001".
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Michael, 5 Apr 2011 @ 9:29am

iPad
I think if he turns that thing over he has a spreadsheet or at least a calculator.
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Michael, 5 Apr 2011 @ 9:30am

Re: iPad
oh - and I think Steve Jobs is suing him for using the logo.
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Anonymous Coward, 5 Apr 2011 @ 9:31am

That's billions with a B, right?

And not just for the amount they could lose in a lawsuit, but what they're making just from iTunes,...

And just the major labels, all 3-4 of them?

Would those losses (and profits) basically double if you lump in Amazon sales?
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Dark Helmet (profile), 5 Apr 2011 @ 9:36am

Life Lessons
My father used to tell me all the time, "Son, if you simply do the right thing, most aspects of your life will work themselves out. If you don't, well, everything you do wrong will eventually catch up to you."

Personally, I can't think of a more applicable example of this life lesson in a business scenario....
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wnyght (profile), 5 Apr 2011 @ 9:44am

Re: Re: iPad
If he gets sued, it's not because of the logo, it's because he altered the device that he bought (licensed) in a matter which apple did not indent for it to be used. If the device had been made my Sony, they would already be in court. LOL
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Anonymous Coward, 5 Apr 2011 @ 9:45am

Record label exec: You know what? I am hurt. It hurts to be betrayed by artists like this.

Do you know how hard it is to spin numbers around to NOT pay you guys? I mean, we had to put the accounting and legal department into overdrive for three months to come up with creative ways not to pay you guys.

And now, after all we've done for you, you artists actually want to be paid? You think we are made of money? Lobbying is expensive!

Bunch of ungrateful *%$+#!
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Trails (profile), 5 Apr 2011 @ 9:52am

What did Rick James' hand from beyond the grave say to the labels' face?
SLAP!
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mike allen (profile), 5 Apr 2011 @ 9:53am

only 2 billion if you take the amount they SHOULD have paid the artists then over the past ten years only it should come out at 500 trillion. just the amount the RIAA think pirates lose them. Brilliant best thing to happen to major labels death.
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Trails (profile), 5 Apr 2011 @ 9:54am

Re: Life Lessons
Your father sounds like Wilford Brimley. Does he eat a lot of oatmeal and talk about "Die-uh-beet-us"?
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Dark Helmet (profile), 5 Apr 2011 @ 10:01am

Re: Re: Life Lessons
Frankly, it's hard to understand much of what's being said through that mustache....
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wnyght (profile), 5 Apr 2011 @ 10:02am

Re: Re: Re: iPad
Made "by" Sony.... an edit button would be wonderful
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AndyD273 (profile), 5 Apr 2011 @ 10:05am

Precedent?
So would this be precedent setting?
Meaning, if they argue in court that these are all sales instead of licenses, can anyone in another case bring this one before the judge and say "Your honor, the record companies testified under oath that these were sales, but now they are arguing license..."
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Anonymous Coward, 5 Apr 2011 @ 10:07am

Oh, don't get all excited. Win or lose the entertainment industry will figure out some way to screw over the consumer.
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MrWilson, 5 Apr 2011 @ 10:08am

And yet despite lawsuits like this and a bunch of other scandals involving the labels screwing over the artists, the RIAA will still spread propaganda under the guise of "think of the artists!" They still pretend they represent the artists when nothing is further from the fact.

That's like saying that corporations represent their workers or politicians represent their voters. Regardless of the process that involves these people coming to power, whether it be the illusion of voting or fronting the initial investments, it's all a farce. These types of people only ever represent the interests of the greedy and power-hungry.

It's like the labels are parents who starve their kids but then turn around and tell others in society that when they don't give them money, those others are taking food out of their children's mouths.
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Michael, 5 Apr 2011 @ 10:24am

Re: Re: Re: Re: iPad
No. You can legally jailbreak an iPho...wait...what made the PS3 different than an iPhone? I hope it was not the size.
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Anonymous Coward, 5 Apr 2011 @ 10:41am

Re:
The $2 billion dollars will be paid out by suing more customers. It's the only way the recording industry can survive because the filthy pirates are taking things AND NOT PAYING FOR THEM!
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xs (profile), 5 Apr 2011 @ 10:44am

Re: Precedent?
I don't think you even need to wait for them actually arguing it all. If we can get their financial record showing how they are paying the artists on the online sales, and those records show the artists were been paid as though the online music were "sales", then by implication, it means record labels were defining online music sales as "sales".

At least that's my shallow knowledge of law tells me.
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Anonymous Coward, 5 Apr 2011 @ 10:48am

"Oh, don't get all excited. Win or lose the entertainment industry will figure out some way to screw over the consumer."

Joke's on them. I stopped being a consumer of their crap a long ago. I buy 2nd hand CDs off of Amazon or Ebay if I really want anything they've produced. Most of my entertainment dollars goes to indy local talent.
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Anonymous Coward, 5 Apr 2011 @ 10:54am

Re:
How is it a scandal, Einstein? The issue was undetermined until a court ruled on the definition.

And they'll probably have no problem paying it, considering how big the check will be that Limewire is gonna be writing next month.
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Ken (profile), 5 Apr 2011 @ 11:01am

Copyright as a commodity defeats the purpose of copyrights
Creators of works and copyright holders are increasingly becoming two different things. No one faults creators of works for being protective of their creations but when the copyright holder and the creator are separated it completely defeats the purpose of copyrights being an incentive to create. It may be time to make copyrights no longer a commodity that can be sold and assigned but a right like freedom of speech which only applies to the originator.
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Jay (profile), 5 Apr 2011 @ 11:03am

Re: Re: Re: Re: Re: iPad
Oh, that's because the PS3 is a game console.

The iPhone is a phone that can play games...

I kid you not, there is no difference other than size!
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Jay (profile), 5 Apr 2011 @ 11:04am

Re:
" I mean, we had to put the accounting and legal department into overdrive for ten. Whole. Years! to come up with creative ways not to pay you guys"

FTFY
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Chuck Norris' Enemy (deceased) (profile), 5 Apr 2011 @ 11:06am

Can the artists just lump all the lawsuits into one? =]
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Jay (profile), 5 Apr 2011 @ 11:06am

Re: Re:
...

Text is a bad purveyor of sarcasm... If this is a joke, please let us know. But I'm just saying, April Fool's was 4 days ago.
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Anonymous Coward, 5 Apr 2011 @ 11:09am

Re: Re:
You mean those trillions limewire "supposedly" owes them?

Oh yeah, that rich (pun most certainly intended).
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Anonymous Coward, 5 Apr 2011 @ 11:16am

Charlie is just whining
Please the artists are actually winning. Charlie is just whining.

The labels have backed themselves onto long narrow bridge with an Army of lawyers on either side and a river of boiling lava beneath. The only question is to whether either Army makes a deal with the labels and turns on the other Army.
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Adam Bell (profile), 5 Apr 2011 @ 11:28am

Re: Re: Life Lessons
My father's version was "competent and ethical behavior requires that you do the thing right and that you do the right thing."
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johnny canada, 5 Apr 2011 @ 11:31am

And would not the labels have to pay the Artists for all the illegal downloads , as they state it was lost income???
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sam sin, 5 Apr 2011 @ 11:41am

same old crap. when the labels do the stealing, it is fine. when anyone else is accused of stealing (file sharing) all hell breaks loose with 'the artists are losing out, they wont be able to produce anything new, cant afford to eat'. gimme a break!! if there really are rules, dont apply them at certain times only when it suits, to certain people only when it suits or under certain circumstances only when it suits. and definitely dont condemn people for doing something that you (the industries) are actually doing, and to their own people as well!
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Ken (profile), 5 Apr 2011 @ 11:52am

Re:
Don't put the artists into this. It is not the artists that are suing, except some our suing their labels. It is the organizations like the RIAA who couldn't create anything out of a paper bag that are doing the suing.
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MrWilson, 5 Apr 2011 @ 12:01pm

Re: Re:
Not paying billions of dollars to the people who actually make the music and for whose sake the labels have argued that they should exist.

I was also referring to all the previous scandals relating to the non-payment of royalties, payola schemes, and royalty fund embezzlement.

Also, I'll be quite surprised if Limewire actually hands a big check over to the labels anytime soon.
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Overcast (profile), 5 Apr 2011 @ 12:09pm

Superfreaky..
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duffmeister (profile), 5 Apr 2011 @ 12:53pm

Re: Re:
Do you believe Limewire has any money? Bankruptcy FTW! They just hope they incorporated in DE so they can just avoid paying anybody. (Like SCO)
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Anonymous Coward, 5 Apr 2011 @ 1:04pm

Re: Re: Re:
Limewire will be cutting a check for billions next month. That's when their settlement court date is.
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Anonymous Coward, 5 Apr 2011 @ 1:07pm

Re: Re: Re:
Limewire owns a fucking hedge fund. And you can't declare BK to get out of these settlements.

So yes, they will be paying up after their court date next month.
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Anonymous Coward, 5 Apr 2011 @ 2:01pm

Re:
Agreed those ungrateful artists, 2.5 billions is an years worth of salaries for all those that support those ungrateful people, did they not think about all those sound engineers, secretaries, managers, publicists, video people who depends on us to pay them, who is going to hire those people now, those jobs are lost forever.
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Anonymous Coward, 5 Apr 2011 @ 2:10pm

I hope this is the shot that kills the dying horse, im tired of kicking it; the thing is fucking stubborn.
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Anonymous Coward, 5 Apr 2011 @ 2:16pm

Re: Re: Re: Re:
Record Label Executive: We must sue Limewire for...

**Camera zooms in**

R.L.E.: One Million Dollars!

**Whole world bursts out laughing**

R.L.E: What the...oh right. What I meant was, we'll sue Limewire for...

**Camera zooms in**

R.L.E.: One Trillion dollars!

**Whole world bursts out laughing again**

WW: Oh, wait. Are they serious?

Another possible variant could be:

WW, after bursting out laughing: This is 2010. After the economic meltdown, that amount of money doesn't even exist anymore!

So, in short, that is a joke.
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Anonymous Coward, 5 Apr 2011 @ 4:51pm

Re: Re: Re: Re:
You also can't make money out of thin air without the government, so trying to squeeze water out of a rock is pointless LoL
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Anonymous Coward, 5 Apr 2011 @ 5:03pm

Re: Re: Re: Re:
Oh wait is Limewire and LLC's?

Just do what any decent label or studio would do, abandon ship NOW!

ps: Is not for nothing all movies produced today have their own companies created as LLC's, if anything goes wrong they just live that virtual company to sink and clean their hands off of it.

Quote:
Limited liability, meaning that the owners of the LLC, called "members," are protected from some or all liability for acts and debts of the LLC depending on state shield laws.

Source: Wikipedia LLC

There is always a way around liability laws.

UPDATE:
Yup, Limewire is an LLC.
Lime Wire LLC

So Limewire has no money and it all has been transferred through payments to other parties, that ship can sink now and people can start a new LLC somewhere else LoL

I hope that LLC is in Texas that have some of the more liberal LLC regulations in the world, you can't even find who is being one there.
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Anonymous Coward, 5 Apr 2011 @ 6:00pm

Re: Re: Re: Re: Re:
LOL Good luck with that.
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ted, 5 Apr 2011 @ 9:14pm

sale or NOT
If what they say "that they are selling the song to us" then why is it that it EXPIRES after a while? Are they saying that if we had gone to a store and picked up the cd that someone would steal it from us after a few months? Cause that is sort of what they are doing to us...
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G Thompson (profile), 5 Apr 2011 @ 11:21pm

Re: Re:
Ah but then if they get money from lost sales/license costs from 'the filthy pirates' then the artists will be able to show that that money must also go to them too.

Which I predict will be the next lawsuit by artists no matter which way this current appeal goes/

Whatever way the labels are screwed, since it seems that the labels have been engaged in a major theft from Artists. A theft that is a real theft in the legal sense, though it is also called by its other legal name... Fraud
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The eejit (profile), 6 Apr 2011 @ 12:41am

Re: Re: Re: Re: Re: Re:
Please remember that the RIAA is NOT an LLC, and thus is open to bribing their way to lawmaking.
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duffmeister (profile), 6 Apr 2011 @ 11:23am

Re: Re: Re: Re: Re:
As I said, No chance of anybody getting paid by them. Even if the *IAA got the $75 billion that they wanted.
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HM, 6 Apr 2011 @ 1:08pm

Re: sale or NOT
Didnt you know, all cds are designed to burn out after 50 plays. Are you trying to invent some everlasting gobstopper and put us all out of business? If these things worked forever kids just just buy one bieber cd and be musically satisfied for live.
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Chuck Norris' Enemy (deceased) (profile), 6 Apr 2011 @ 1:10pm

Re: Re:
?...Read the post again...this is about artists suing labels for not paying proper loyalties on digital downloads.
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btr1701 (profile), 6 Apr 2011 @ 1:38pm

Karma
Kinda neat watching these labels (who are supposedly all about protecting the artist, dontcha know) squirm at the end of the hook on one of these massive damage claims.

You live by the Big Copy sword, you die by the Big Copy sword.
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ProjectChaos, 7 Apr 2011 @ 3:43am

Re: Re: iPad
Y? oh ya.. cause all this world gives a damn about is money.. not the pleasure of helping out a fellow human being..
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None of your buisness, 7 Apr 2011 @ 3:50am

Re: Re:
Look. IDK who u are.. but I'm an unsigned artist.. and im staying that way because the contracts that are used by the record labels SUCK! they screw people over.. to screw u must BE screwed as well
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Why should it mater?, 7 Apr 2011 @ 3:55am

WAIT!
The companys who made the programs for the 'illegal' downloading are geting sued by the record labels? Then the artists are suing the record labels? Yet the idiots actually doing the downloading (and mostly uploading) Are NOT getting sued? Say WHAT?
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larry, 1 May 2014 @ 3:15am

royalties
Well whats new under the mafias wing I don't see any major without big offices spending big money all over the place but artists & producers starve
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