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

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...

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