Eminem firm loses iTunes royalty lawsuit against Universal

Posted:
in iPod + iTunes + AppleTV edited January 2014
Universal Music has prevailed in a case that would have otherwise given millions more to artists for the sale of their songs on digital download services such as Apple's industry-leading iTunes Store.



The Detroit production company involved in Eminem's early albums had previously filed suit against Universal Music, seeking more royalties on songs sold online versus traditional CD sales.



However, a Los Angeles jury late last week sided with Universal's arguments, agreeing that a song sold online is no different from a song bought in a store.



"We are pleased with the jury's verdict," said Universal spokesman Peter Lofrumento.



Bloomberg News reported FBT Productions, which signed Eminem before he came to prominence, was seeking $1.47 million in damages.



An FBT victory could have dramatically changed the pecking order for proceeds from digital downloads, such as Apple's dominant iTunes Store.



The jury's decision means record labels will continue to control most of the revenues from album sales. Artists and production companies have called for more proceeds from the online music marketplace as the record labels' overhead is much lower since companies like Apple are responsible for the marketing, management, delivery, and so on.



The production company had argued their contract entitles them to more proceeds for songs sold online. It reasoned that the tracks the label provides to services like iTunes and Amazon are music "masters", used for reproducing endless digital copies. FBT, owned by brothers Mark and Jeff Bass, said their contract entitles them to higher royalties on music "master" sales, but the jury did not agree.



Eminem was not a party to the suit, although he would have earned much more in unpaid royalties had the jury sided with FBT. Lawyers for FBT said they will appeal the jury's ruling.



The brother-owned company did prevail on a separate claim involving underpaid royalties, netting a minor victory. Universal was ordered to pay $159,000.
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Comments

  • Reply 1 of 34
    solipsismsolipsism Posts: 25,726member
    $1.47M?! That seems like such a low amount to sue over these days. I guess I'm desensitized with all the talk of billions.
  • Reply 2 of 34
    maestro64maestro64 Posts: 4,570member
    wow, that is not good, the court is saying that cost for online music is the same as making and distributing a CD.



    Remember artists get a % of sale after costs, What Eminem was trying to show that cost for online music is far less so they should earn more royalties.



    Cost for MP3 is far less then CD, you make one copy and down load it millions of times. CD you have to make millions of copies and hope someone buys them. Variable costs are so much less with MP3 and any CD. The artist should make more.
  • Reply 3 of 34
    trobertstroberts Posts: 701member
    Once the contracts the artists have expire, the artists need to not re-sign, but form their own "label" so they have more control over their music and money. I highly doubt Apple cares which label music is released by since their model for distribution and payment is pretty straight forward. The only "problem" the artists will have is they will not have the money and expertise that the big labels have at their disposal, but if they have money for their clothes, mansions, cars, and "bling", then they should have money to at least fund their musical expenses that will in turn provide them with income.
  • Reply 4 of 34
    mknoppmknopp Posts: 257member
    So, what does this mean for the record company's contention that songs bought online are simply licensed to the end user not sold, and thus the end user has no right to sell the song?



    Is this not a complete double standard? How can they pay the artist less because it is a sale and not a license, but get around the Doctrine of First Sale by saying it is a license not a sale?



    Can anyone explain this one legally?
  • Reply 5 of 34
    kickahakickaha Posts: 8,760member
    Quote:
    Originally Posted by mknopp View Post


    Can anyone explain this one legally?



    Yes, it's called being bastards.
  • Reply 6 of 34
    ivladivlad Posts: 740member
    Agg do we also need to Bailout M&M?
  • Reply 7 of 34
    l008coml008com Posts: 163member
    It's good to see an Artist suing the real criminals, the record labels, instead of suing Apple or p2p users. Too bad he lost though. Apple should start their own record label.
  • Reply 8 of 34
    lafelafe Posts: 252member
    Quote:
    Originally Posted by AppleInsider View Post


    Eminem was not a party to the suit, although he would have earned much more in unpaid royalties had the jury sided with FBT. Lawyers for FBT said they will appeal the jury's ruling.



    Eminem wasn't suing anyone. Some commenters seem to think that he was.



    This suit seems to have been another case of big-huge-monster-company with

    the higher-priced lawyers beating the little guy. Maybe it'll open the door to more

    such cases, though, and the recording industry will start to remodel itself into

    a more sensible format for modern times.



    We are entering an age of pure content distribution, and there isn't as much

    need for a big company to do the CD-pressing and marketing for an artist.

    Artists are connecting with listeners and viewers in more organic ways,

    and the old model for money-making won't work in this new environment.



    Free the music!
  • Reply 9 of 34
    l008coml008com Posts: 163member
    Quote:
    Originally Posted by Lafe View Post


    Eminem wasn't suing anyone. Some commenters seem to think that he was.



    You can thank AppleInsider and their misleading headlines for that one. I don't recall if it was this site or another site, but one Mac site went through a stretch where their headlines were horribly inaccurate.
  • Reply 10 of 34
    Quote:
    Originally Posted by l008com View Post


    It's good to see an Artist suing the real criminals, the record labels, instead of suing Apple or p2p users. Too bad he lost though. Apple should start their own record label.



    I thought they couldn't do anything like that because of their lawsuit with Apple Records
  • Reply 11 of 34
    l008coml008com Posts: 163member
    Quote:
    Originally Posted by mariofreak85 View Post


    I thought they couldn't do anything like that because of their lawsuit with Apple Records



    Who knows what the details of that whole mess are.
  • Reply 12 of 34
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by mariofreak85 View Post


    I thought they couldn't do anything like that because of their lawsuit with Apple Records



    I thought that was settled. They issue was with brand confusion. Apple calls their music store iTunes Music Store, all they would have to do to start a record label would be to use iTunes Record Label, or even create a subsidiary company that would deal with it never once mentioning Apple, Inc. But there seems to be some other issues with Apple do such a thing.
  • Reply 13 of 34
    Quote:
    Originally Posted by solipsism View Post


    I thought that was settled. They issue was with brand confusion. Apple calls their music store iTunes Music Store, all they would have to do to start a record label would be to use iTunes Record Label, or even create a subsidiary company that would deal with it never once mentioning Apple, Inc. But there seems to be some other issues with Apple do such a thing.



    From what I remember, the result of the last lawsuit is that Apple Inc. essentially owns all the rights to the "Apple" name now, and "Apple Corps" is a licensee of "Apple Inc.". This means "Apple Inc" can now do whatever they want with the name, including opening their own music label.
  • Reply 14 of 34
    First, please note that Eminem was not trying to prove anything as he wasn't a party to the lawsuit. Second, this case was decided by a jury not the court, so no new law was made.



    Quote:

    This suit seems to have been another case of big-huge-monster-company with

    the higher-priced lawyers beating the little guy.



    In this case, I disagree. This isn't the same thing as the RIAA's lawsuit frenzy primarily because it wasn't a copyright case. Rather, it was a contract dispute (and I doubt FBT's lawyers were cheap).



    According to Bloomberg, FBT productions argued that the royalty provision in their contract with Universal only covers CD sales, not digital downloads. FBT's contention was that the "licensing provision" of the contract applies to online distribution and sales because digital downloads constitute sales of "the master" recording -- in which case, FBT would be entitled to 50% royalties.



    So, this case was really just a question of contract interpretation, and it was decided by a jury. The fact that it was decided in Universal's favor may have something to do with having better lawyers than FBT. Then again, anything can happen in a jury trial.



    Quote:

    Maybe it'll open the door to more such cases, though, and the recording industry will start to remodel itself into a more sensible format for modern times.



    I doubt it. While a jury verdict in FBT's favor may have resulted in similar lawsuits against Universal, there's no guarantee that those cases, if brought before a jury, would have similar results. Also, while many of Universal's contracts with artists, production companies, etc. may have very similar language, they probably aren't exactly the same.



    I agree that there needs to be a paradigm shift in the recording industry in order for it to survive; however, I don't think relatively minor contract disputes with small production companies are going to be much of a catalyst for change.



    If anything, I think that the result of this case will be Universal yelling at their lawyers for drafting lousy contracts. (Even though Universal prevailed, it still had to pay to defend the case all the way to a jury trial.)



    Finally, this is only a guess, but I imagine that many of the contracts that Universal has signed with new artists, or renewed with old ones, contain language that specifically provides for the percentage of royalties each to which each party is entitled from online sales.
  • Reply 15 of 34
    hillstoneshillstones Posts: 1,490member
    Quote:
    Originally Posted by Maestro64 View Post


    wow, that is not good, the court is saying that cost for online music is the same as making and distributing a CD.



    Remember artists get a % of sale after costs, What Eminem was trying to show that cost for online music is far less so they should earn more royalties.



    Cost for MP3 is far less then CD, you make one copy and down load it millions of times. CD you have to make millions of copies and hope someone buys them. Variable costs are so much less with MP3 and any CD. The artist should make more.



    Online music is the same as CD prices, if you know where to go. First of all, Eminem had nothing to do with this lawsuit. It was brought on by FBT Productions, who signed him before he became famous. So they used his name for publicity, and they are trying to collect more money simply because he is popular.



    You need to get out and go shopping. The new U2 CD is a perfect example. iTunes sells the standard issue CD for $9.99 (not the "deluxe" version, which is way over-priced at $17.99). Target sells the CD for $9.98, and Wal-Mart sells the CD for $9.97. So I can get the actual CD for the same price as iTunes, and I get the actual CD with printed liner notes.



    If the artist doesn't like the contract established with the record label, they should go independent. The artist should make the same amount whether it is digital or CD. It doesn't cost that much for mass duplicating a CD versus the server maintenance for storing and offering the digital download.
  • Reply 16 of 34
    Quote:
    Originally Posted by mknopp View Post


    So, what does this mean for the record company's contention that songs bought online are simply licensed to the end user not sold, and thus the end user has no right to sell the song?



    Is this not a complete double standard?



    You never "owned" the songs you bought from a brick and mortar record store either.



    You owned the physical object (be it LP, tape, or CD) on which the song was recorded. The copyright holders retained ownership of the songs themselves.



    Under the Doctrine of First Sale, you have the right to resell physical objects you own on which copyrighted material is recorded, provided you didn't produce or keep any additional copies of the material for yourself.



    With a digital download, there was no physical object sold to you, thus no physical object to resell to someone else.

    Quote:

    How can they pay the artist less because it is a sale and not a license, but get around the Doctrine of First Sale by saying it is a license not a sale?



    The outcome of this court ruling was not that the labels could pay the artists less for digital downloads than they do for record sales - rather, it was that the labels should pay the artists exactly the same for digital downloads as they do for record sales. The artists (or rather, in this case the artists' agents) had argued unsuccessfully that digital downloads should yield more money to the artists than physical record sales.
  • Reply 17 of 34
    dimmokdimmok Posts: 359member
    Some judges got PAID...big time for this one.....
  • Reply 18 of 34
    quinneyquinney Posts: 2,525member
    Quote:
    Originally Posted by resipsa View Post


    Finally, this is only a guess, but I imagine that many of the contracts that Universal has signed with new artists, or renewed with old ones, contain language that specifically provides for the percentage of royalties each to which each party is entitled from online sales.



    Precisely. In fact, I think the artists would demand this, since they feel like they are

    being screwed.
  • Reply 19 of 34
    hillstoneshillstones Posts: 1,490member
    Quote:
    Originally Posted by l008com View Post


    It's good to see an Artist suing the real criminals, the record labels, instead of suing Apple or p2p users. Too bad he lost though. Apple should start their own record label.



    Read the article. The artist did not sue the record label. The production company that signed him early in his career sued them demanding more money.



    "Eminem was not a party to the suit, although he would have earned much more in unpaid royalties had the jury sided with FBT. Lawyers for FBT said they will appeal the jury's ruling."
  • Reply 20 of 34
    jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by mknopp View Post


    So, what does this mean for the record company's contention that songs bought online are simply licensed to the end user not sold, and thus the end user has no right to sell the song?



    Is this not a complete double standard? How can they pay the artist less because it is a sale and not a license, but get around the Doctrine of First Sale by saying it is a license not a sale?



    You seem to be misinterpreting the decision.



    The reports are seeming to say that there is an agreement that the artist gets $x.xx per song sold/licensed/distributed/whatever. The decision says that the cost of distribution is irrelevant since it doesn't appear to be part of the contract (at least from all the reports I've read).



    Assuming that's correct, then it's the right decision. If the artists signed a contract saying they get $x.xx per song, that's what they should get. They have no right to go back and demand more because the record company finds a lower cost way to distribute.



    They are free, of course, to try to negotiate better terms the next time their contract comes up, but they have no right to demand retroactive changes.



    Quote:
    Originally Posted by DimMok View Post


    Some judges got PAID...big time for this one.....



    Funny, it was a jury decision, not a judicial one. Considering that juries typically side with the little guy, the evidence must be pretty good.



    Quote:
    Originally Posted by Maestro64 View Post


    wow, that is not good, the court is saying that cost for online music is the same as making and distributing a CD.



    Remember artists get a % of sale after costs, What Eminem was trying to show that cost for online music is far less so they should earn more royalties.



    Cost for MP3 is far less then CD, you make one copy and down load it millions of times. CD you have to make millions of copies and hope someone buys them. Variable costs are so much less with MP3 and any CD. The artist should make more.



    That doesn't appear to be the issue in this case. There's absolutely nothing that implies that the artist was paid a percent of gross margin (or net margin or anything else). Every article I've seen on the case says that the artist gets a fixed payment PER SONG.



    There's nothing that implies that the artist's share depends in any way on cost. If it did, it would have nothing to do with Apple since Apple has absolutely nothing to say about the cost of distribution via CD. If it were a matter of the artist getting an incorrect share of the profits, the suit would have been against the record labels, not against iTunes.
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