How Sony Got Off Easy With Its 'Settlement' In Class Action Lawsuit By Underpaid Artists

from the class-actions-in-action dept

Tue, Mar 20th 2012 1:28pm — Mike Masnick

While Eminem's producers got a ton of attention and a big ruling noting that the labels had incorrectly accounted for iTunes sales -- leading to some back of the envelope calculations that artists might be owed around $2 billion in unpaid royalties from the major labels -- the very first of these cases (which actually predates the Eminem case) has reached the "settlement" stage, with Sony Music offering all qualified artists a relatively tiny pool of money to split.

The case was originally brought back in 2006 by the Allman Brothers and Cheap Trick -- which we wrote about at the time. Both of those bands eventually settled, but by then the case had turned into a class action lawsuit for other Sony Music artists, with the Youngbloods and Elmo Shropshire (who has been involved in some other bizarre copyright lawsuits) taking the place as the named artists in the case. At issue, of course, is whether or not an iTunes transaction is a sale (tiny royalty payment) or a license (much bigger royalty payment). However, the settlement seems pretty paltry. Sony pays out $7.95 million, but as is so often the case in class action lawsuits, the lawyers get $2.65 million of that, leaving $5.3 million for all of the remaining qualified artists. As Digital Music News explains:

Of that $5.3 million, $5 million is reserved for artists who sold at least 28,500 total downloads on iTunes between the inception of iTunes on January 9, 2001 and December 31, 2010 including current class members Youngbloods and Shropshire. Qualifying members would split that $5.3 million pro rata to the number of downloads of their records. However, these two artists may ultimately receive a lot less than splitting the $5 million between themselves because any artist who was signed to Epic, Columbia or Arista Records who sold more than 28,500 is eligible to join the class if they entered into agreements dated between January 1, 1976 and December 31, 2001.

According to a trusted source there may well be over 100 artists would qualify for membership. The balance of the money, only $300,000, is reserved for all Sony artists with fewer than 28,500 total downloads on iTunes.

The proposed settlement also provides for a prospective 3 percent bump in artists' royalty rates with respect to permanent digital downloads and ringtones sold in the US after January 1, 2011. The 3 percent is against Sony Music Entertainment's gross receipts. This amounts to 3 percent of 70 cents (the amount Sony received for 99 cent downloads) and that is only 2.1 cents.

It's... something. But considering how much was being dangled in previous estimates, it sure sounds like Sony may end up getting off on the cheap end if this settlement is completed. Oh, and in case you were wondering, Sony probably won't even have to pay out a chunk of this money because if any of the artists haven't recouped yet, this money will merely be "credited" towards their accounts. And considering how the labels aren't exactly known for keeping the best records as to who's actually recouped, there's plenty of room for Sony to keep the money and just claim it's crediting an account that will never surpass the red line.

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Filed Under: class action, copyright, elmo shropshire, itunes, licenses, royalties, sales, youngbloods
Companies: sony music

18 Comments

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Hulser (profile), 20 Mar 2012 @ 1:09pm

Forget the artists, what about the affect on the consumer?
At issue, of course, is whether or not an iTunes transaction is a sale (tiny royalty payment) or a license (much bigger royalty payment).

What about the affect of this settlement on the consumer? Because this was settled instead of getting to an official verdict, we won't have Sony going on the record as stating that iTunes transactions are really a sale (which would imply more privileges to the consumer) rather than a license (which gives Sony the wiggle room to change the terms after the transaction).

I still think that if you involve the courts, that the details of all settlements should be made public and should be accounted for (to at least some degree) in case law. If you don't want to keep the dirty secrets of your settlement, then pay for arbitration or something and stop wasting taxpayer money by clogging up the courts.
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Rikuo (profile), 20 Mar 2012 @ 1:33pm

So...Sony can still say who has and who has not recouped yet? And the courts aren't going to force an audit by a 3rd party? Because, telling Sony to pay back royalties to artists, and then leaving it up to Sony to say which artists it has to pay back...is stupid.
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Anonymous Coward, 20 Mar 2012 @ 1:39pm

If I didn't pay Sony for 28,000 songs I would owe them 4.2 million.
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Anonymous Coward, 20 Mar 2012 @ 1:41pm

and the real piss take is that an ordinary member of the public can easily be stung for $150,000 for sharing 1 damn song, let alone 28,500! and the studios wonder why people are fed up with them and their attitude!
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weneedhelp (profile), 20 Mar 2012 @ 1:46pm

I tell my supervisors all the time:

You don't kick the legs of the chair you are standing on.
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Darryl, 20 Mar 2012 @ 1:57pm

Re:
That should be 4,200,000,000 not 4,200,000 150,000*28,000.

Plus they will probably charge a handling fee for each artist they credit the money to cause a net negative contribution to their advance account.
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fairusefriendly (profile), 20 Mar 2012 @ 1:59pm

wouldn't it be easier to just ask for it to be declared a breach of contract
And basically reclaim the copyright that was transferred via that contract.

If the record company doesn't want to honor the deal as written that they choice, they just can't take the benefits of the contract (transfer of the copyright).
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weneedhelp (profile), 20 Mar 2012 @ 2:10pm

It's... something.
Like being anally raped and saying at least he didn't kill me.
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Andrew (profile), 20 Mar 2012 @ 2:15pm

Sony probably won't even have to pay out a chunk of this money because if any of the artists haven't recouped yet, this money will merely be "credited" towards their accounts.

And let's not forget that they can charge the legal expenses incurred on this case to the artists too.
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:Lobo Santo (profile), 20 Mar 2012 @ 2:29pm

Re: Der Best!
Meaning there's no reason for them to not get the very best legal team which money can buy...
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Anonymous Coward, 20 Mar 2012 @ 2:33pm

And did we tell you the name of the game, boy?
We call it "Riding the Gravy Train".
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Someantimalwareguy (profile), 20 Mar 2012 @ 3:05pm

Re: And did we tell you the name of the game, boy?
Hmm - that post deserves a cigar ;)
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Anonymous Coward, 20 Mar 2012 @ 4:06pm

Re:
In any other field, it would also be criminal, but once again, Sony gets away with outright theft. I bet you ten bucks that if someone not of the big corps did that, they'd be locked up for fraud or obtaining monies by deception.
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A Guy (profile), 20 Mar 2012 @ 4:25pm

There is one easy solution for new artists. If you discover Sony owes you money, don't join the class.
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Anonymous Coward, 20 Mar 2012 @ 8:28pm

Re:
It is a self-inflicted injury. The artists, who were silly enough to sign up with Sony in the first place, have just discovered, yet again, that Sony is quite willing to screw them. The lawyers do well. Sony gets away with it with a slap on the wrist. The artists -- not so good.

Younger artists, please note.
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Anonymous Coward, 21 Mar 2012 @ 2:10am

Re:
Correction. If you discover Sony owes you money, infringe their copyrights to the value of the money owed via download services such as iTunes.
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EF, 21 Mar 2012 @ 5:44am

A proper label
Scumbags; how's that for a "label".
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Mike Raffety (profile), 21 Mar 2012 @ 11:25am

This sounds so simple ...
WHY are they settling for pennies on the dollar that is clearly owed them? Surely the proper royalties are FAR larger than any possible legal costs, and the outcome is almost assured.
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