Judge Slams Universal Music For Trying To 'Bamboozle' Court & Producers Over Eminem Royalties

from the but-that's-how-the-labels-work... dept

Mon, Jul 2nd 2012 8:31am — Mike Masnick

We've had plenty of discussions about shady RIAA accounting, and more and more of that is coming out in public following a series of lawsuits that concern both how the major labels account for digital sales (is it a sale or a license?), but also in how they calculate overall royalties. One of the most high profile of these cases involves Eminem's producers, FBT Productions, which was the first of these cases to rule that digital/iTunes sales were "licenses" and not sales (and thus required Universal Music to pay much higher royalty rates: 50% as opposed to ~15%). Of course, as the case has moved on to other stages, it's increasingly revealing some of the many, many shady practices that Universal Music has been using to try to hide revenue from Eminem -- including trying to expense the cost of this very lawsuit against his earnings.

The latest news is that a judge has completely slammed Universal's latest attempt to hide money from FBT, after it came out that Universal had inserted what appeared to be a minor definitional piece into a summary judgment action earlier in the case, which it's now using to claim that FBT should only get a cut of 29% of revenue, rather than 100% or revenue. The details are a bit technical, but as THResq explains:

Last autumn, Universal brought a motion for summary judgment on the phrase "our net receipts" in the agreement in question. In response, the judge ruled that "our" referred to Aftermath. So Universal says the judge's ruling means FBT has to live with what Aftermath gets (29 percent) instead of what Universal gets (100 percent).

However, Universal also has some sort of tricky accounting going on for foreign receipts, in which Aftermath only gets 29% -- so now it's arguing that it only has to pay out the 50% on that 29%, rather than on the full 100%. The judge reasonably went ballistic at this obvious attempt to trick the court and FBT, and to effectively sneak through the provision defining "our net receipts" earlier:

"Furthermore, the Court is deeply troubled by Defendants’ argument. While it is hard to see what FBT could gain by feigning ignorance, it is now quite apparent what Defendants could hope to gain by bamboozling the Court and Plaintiffs on this issue. Defendants’ current stance makes it appear as though Defendants carefully inserted the issue into the motion for summary judgment before they had notified FBT or the Court of what percentage of the revenues from foreign sales of permanent downloads and mastertones would be paid to FBT. An attempt to dupe the Court into a premature ruling will not serve as the basis to deny FBT an opportunity to challenge Defendants’ accounting practices."

This does not bode well for Universal in this case, however it is yet another example of the tricky math that the RIAA labels like to use in screwing over artists. It's good to see more and more of this coming out in public, though it's really quite amazing the lengths that these labels (mainly the majors) will go to in order to keep money from artists, using all sorts of suspicious accounting and legal tricks. The deceptiveness here is clearly planned out, and they seem almost proud of how clever they are in screwing over artists. It's stunning. In an era where more and more artists are realizing that having a label is now an option not a requirement, publicly trying to screw them over on royalties is not exactly a path to success.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: bamboozle, court, eminem, royalties
Companies: fbt productions, universal music

31 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

MrWilson, 2 Jul 2012 @ 8:53am

RIAA to pirates: "Stop stealing from artists. That's our business model!"
[ link to this | view in thread ]
Josef Anvil (profile), 2 Jul 2012 @ 8:55am

Help is on the way
Eminem should contract David Lowery as a consultant on ethics in the music business.
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 8:58am

when will courts realise that they have been/are lied to at every turn by the entertainment industries? when will they learn that the people that are keeping money from artists is the entertainment industries? when are they going to realise that the so-called 'damage' down to the industries and the artists is by the industries themselves, not done through 'piracy'? when are they going to realise that the entertainment industries do nothing but lie, cheat and deceive anyone and everyone in order to maintain their hold over the artists and the public and they need to be made to stop? being prevented from continuously relying on the courts (using lies as evidence) for help would be a good place to start!!
[ link to this | view in thread ]
weneedhelp (profile), 2 Jul 2012 @ 9:01am

Re:
I guess if you actually buy the music on CD then the argument could be made you are receiving stolen goods.
[ link to this | view in thread ]
lucidrenegade (profile), 2 Jul 2012 @ 9:11am

"We've had plenty of discussions about shady RIAA accounting"

Wouldn't that be "slim shady" in this case? :0)
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 9:16am

Re:
Thanks! You went there so I didn't have to.
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 9:17am

This is ultimately why some artists have stood up in support of services like megaupload. Ultimately the RIAA and big corporations like these are much more detrimental than piracy.
[ link to this | view in thread ]
Hephaestus (profile), 2 Jul 2012 @ 9:22am

Re:
A lot of them have. The problem is proof. With out that it is just speculation and can not be acted upon.
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 9:24am

Re:
I see what you did there
[ link to this | view in thread ]
Hephaestus (profile), 2 Jul 2012 @ 9:25am

I wonder why no one has ever thought to file a class action lawsuit against the labels for the sort of accounting they do.
[ link to this | view in thread ]
The eejit (profile), 2 Jul 2012 @ 9:35am

Re:
The RIAA EULA strictly forbids it - they must negotiate directly with their label. And by "negotiate", I mean, "Bend over and take it".
[ link to this | view in thread ]
Rob (profile), 2 Jul 2012 @ 9:36am

What do the courts expect? They're artists not mathmeticians...
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 9:42am

The Music Industry is Financed By Slavery
RIAA ... "stealing from artists (is) our business model"

If this weren't true (it has been an open secret for decades), it would be hilarious.

Overt slavery is only dead if the determination of whom to enslave is based solely on race. Otherwise, it is alive and thriving in the old-school music industry (and many others).
[ link to this | view in thread ]
TtfnJohn (profile), 2 Jul 2012 @ 9:45am

Like the major film studios as far as paying the creators goes Universal and other RIAA members all agree that 1+1 = -3 so that the artist ends up paying them!

Kinda like income tax that way so it's gotta be legal.
[ link to this | view in thread ]
The eejit (profile), 2 Jul 2012 @ 9:54am

Re:
The only difference between the two is that, if you don't pay income tax, you don't get free stuff. Like education.
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 9:56am

Re: Re:
Uh, there is massive proof. More than you could possibly ever use. This is just one tiny little instance, and the overarching phenomenon is so universal that people simply can't see it for how big it is.
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 9:57am

I think artists should get 50% of the royalties anyway and the rest should be divvied up among other parties. They do the hard work and record labels profit, how is that right or fair?

If I were a musician I would sell my work independently, let's face it the Internet makes that piss easy.
[ link to this | view in thread ]
The Spork (profile), 2 Jul 2012 @ 9:59am

I've said it a million times
the RIAA/MPAA are lying, cheating, greedy bastards. for their crimes against artists, they should burn at the stake or some other painful punishment.
[ link to this | view in thread ]
bigpicture, 2 Jul 2012 @ 10:13am

Re: Help is on the way
Ethics - Music Industry = oxymoron
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 10:41am

Re: Re: Re:
Everyone can see it but it costs to much to litigate proof. I know and you know it but we need enough proven incidences to say "this is a huge problem lets fix it". Until we have enough tiny instances to lay side by side so they paint a nice big picture the industry just waves away our complaints and says, "Us? No we care about the artist."
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 10:53am

Re: Re:
if you don't pay income tax, you don't get free stuff. Like education.

No, unfortunately that's not true. Those who do pay taxes foot the bill for everyone who underpays or don't pay at all. If your tax-evading parent's kid does not show up at his public school, they will haul him in because that hurts their bottom line.
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 10:56am

Can we make it 'sales' on the supply side and 'licenses' on the consumer side? That would be sweet, thanks yer honer.
[ link to this | view in thread ]
Rick Smith (profile), 2 Jul 2012 @ 11:51am

Re:
I think you ask the wrong question. I believe most people already know this. But enforcement will continue until the laws change. And it�s very profitable and easy for the entertainment industry to buy themselves the laws. Certainly much cheaper than paying the actual artists since the number of people they have to payoff is small when compared to the number of artist they �employ�.
[ link to this | view in thread ]
Anonymous Coward of Esteemed Trolling (profile), 2 Jul 2012 @ 11:51am

There is too much oxy in that collection of words.

moron - Ethics = Music Industry

There.... fixed it for ya !
[ link to this | view in thread ]
Digler99, 2 Jul 2012 @ 1:58pm

Re:
RIAA: veracity is slim and accounting is shady.
[ link to this | view in thread ]
DanZee (profile), 2 Jul 2012 @ 1:58pm

Great news
Great news. Another example of a record company using the old shell game to NOT pay their artists exposed!
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 2:10pm

It's a vampire industry, surely you can't expect them to just walk away with out a taste? Of course the tasting becomes the whole meal...
[ link to this | view in thread ]
That Anonymous Coward (profile), 2 Jul 2012 @ 4:11pm

Re: I've said it a million times
The labels/studios are lying cheating greedy bastards.
The RIAA/MPAA are just the lobbyists paid to support the positions of the cartel members.

I wonder if one could use kickstarter to fund bringing a former head of the RIAA/MPAA out of "retirement" to argue how horrible the business practices are.

If you pay them, they will say anything.
[ link to this | view in thread ]
Anonymous Coward, 2 Jul 2012 @ 10:19pm

C'mon, googlypants! I'd like to see you defend this label!
[ link to this | view in thread ]
Niall (profile), 3 Jul 2012 @ 5:29am

Re: Re: Re:
No, because it's the law that everyone is educated. I don't know a single 'public' school that reckons "hey, I'm going to miss out on juicy government grants if little Johnnie doesn't come in today".

There are always free-loaders in any system - the trick is to minimise them. Sometimes, they are 'allowed' free-loaders. Sometimes, the free-loaders are taking advantage of others. No system is perfect, so all you can do is decide which forms you don't mind, and which forms you want to campaign against.

It would be a wonderful world (libertarian utopia?) if you only had to pay taxes for those services that you particularly want, or if everyone had a decent standard of living as an absolute minimum with no taxes. Sadly, we don't live in Star Trek's Federation, and we have to deal with the real world.
[ link to this | view in thread ]
Anonymous Coward, 3 Jul 2012 @ 5:57am

What do you expect lol they're trying to make as much as they can before they're obsolete.

Their days are numbered and they have no place on this planet anymore.

If I was the president I would round them all up and send their ass to Gitmo. They're the real terrorist lol.
[ link to this | view in thread ]