In march 2009, I read on Bobby Owinskis blog a very disturbing news on a case that might really hit the recording industry in it’s very fundaments,
and Universal will be the first to pay.
In a nutshell:
Rapper Eminem, or better his production company FBT sued Universal Music Group (UMG) over what amounts to the definition of ownership of a digital file.
FBT claimed that UMG owed them more money because a digital file sold via download shops is actually a license. UMG insisted that regardless of the media format, Eminem’s music is part of their distribution deal.
So the case is about is it licensing or is it distribution?
FTB claimed that, since there’s no manufacturing or packaging costs (which are covered by the record label), and only a single copy is delivered to the digital download companies, then it should be a license, since that’s what occurs in other licensing deals. UMG argued that a sale is a sale regardless how it happens.
If the court decided that selling a digital file is a licensing deal, then the record label and the artist would split the proceeds 50/50 and the artist would be entitled to about 35 cents per download. But if they decided it’s distribution, then the original recording agreement would still be in force and the artist would make about 15% (more or less), or about 10 to 20 cents on every download instead.
In the first instance the court sided with UMG – a great sigh of relief from the music industry. If the ruling had gone Eminem’s way, every record label would owe their artists a huge amount of money, effectively bankrupting the music industry.
Now last week, an appeals court ruled against UMG and ordered them to pay FBT a full 50% split of all royalties, instead of the 12% that they were getting before. This ruling will get FBT millions, but it could mean that the music industry will owe hundreds of millions in back and future royalties.
And this will probably be the death blow for the music industry as we know it.