Eminem takes record label to court over iTunes royalties
Hip hop mogul Eminem this week became the first artist to take a legal stand against record labels over royalties for tracks sold through digital download services like Apple's iTunes, an increasing source of tension between the two sides now that a significant percent of music sales are being made online.
The lawsuit, filed in a Los Angeles court two years ago by the rapper's production company F.B.T., is unusual in that it has actually made its way to trial, reports The Wrap. At issue is whether musicians should be entitled to a larger share of digital download revenues given that much of the overhead in promoting and distributing songs online falls on service providers like Apple, not the labels.
Richard S. Busch, an attorney for the Eminem camp, reportedly spent most of the second day of the trial pounding a former Universal commerce executive with questions over exactly what costs the labels incur when selling music tracks online, which does away with the need for jewel cases, CD duplication, sales teams, and in-store displays.
“Universal provided two digital files to the download companies – a master recording and a metadata guide setting forth a procedure for getting the music on their system,” Busch said. “With the digital download agreements, Universal has no manufacturing costs connected with that, correct?”
"Generally, that’s true," the former executive responded. "But it has costs. You don’t call them manufacturing costs the way that term has been used traditionally. Manufacturing costs are for physical costs, and that has gone away."
Busch then posed the question of whether service providers like Apple also pay the labels a fee for the digital files they eventually turn around and sell to consumers over services like iTunes, to which the Universal witness responded by saying, "We asked them to pay a service charge for that, but we didn’t always manage to collect it…"
Costs related to sales of digital music files aren't the only source of contention between the two sides in the ongoing trial. Eminem and F.B.T. are also questioning whether the transfer of an artist's music to service providers constitutes a licensing agreement or a distribution deal.
Under most contracts with their labels, artists receive around 20 cents -- or less than 30 percent -- of the approximate 70 cents Apple pays labels for the sale of each 99 cent song sold, under the assumption that such sales are part of a distribution deal. But Eminem's attorneys are arguing that since digital sales differ from traditional record store sales in that the music content has long been licensed with restrictions, artists should see a 50-50 split, or about 35 cents a song, per their existing agreements.
In recent years, Eminem has been relentless in his efforts to protect what he believes is rightfully his. In 2004, the Detroit-based rapper sued Apple over its unauthorized use of his song "Lose Yourself" in a TV commercial for the iTunes music store. He again sued the iTunes operator in 2007, alleging that his music was converted to digital form and sold through the service without his blessing.
The first suit was later settled out of court for an undisclosed financial sum.
The lawsuit, filed in a Los Angeles court two years ago by the rapper's production company F.B.T., is unusual in that it has actually made its way to trial, reports The Wrap. At issue is whether musicians should be entitled to a larger share of digital download revenues given that much of the overhead in promoting and distributing songs online falls on service providers like Apple, not the labels.
Richard S. Busch, an attorney for the Eminem camp, reportedly spent most of the second day of the trial pounding a former Universal commerce executive with questions over exactly what costs the labels incur when selling music tracks online, which does away with the need for jewel cases, CD duplication, sales teams, and in-store displays.
“Universal provided two digital files to the download companies – a master recording and a metadata guide setting forth a procedure for getting the music on their system,” Busch said. “With the digital download agreements, Universal has no manufacturing costs connected with that, correct?”
"Generally, that’s true," the former executive responded. "But it has costs. You don’t call them manufacturing costs the way that term has been used traditionally. Manufacturing costs are for physical costs, and that has gone away."
Busch then posed the question of whether service providers like Apple also pay the labels a fee for the digital files they eventually turn around and sell to consumers over services like iTunes, to which the Universal witness responded by saying, "We asked them to pay a service charge for that, but we didn’t always manage to collect it…"
Costs related to sales of digital music files aren't the only source of contention between the two sides in the ongoing trial. Eminem and F.B.T. are also questioning whether the transfer of an artist's music to service providers constitutes a licensing agreement or a distribution deal.
Under most contracts with their labels, artists receive around 20 cents -- or less than 30 percent -- of the approximate 70 cents Apple pays labels for the sale of each 99 cent song sold, under the assumption that such sales are part of a distribution deal. But Eminem's attorneys are arguing that since digital sales differ from traditional record store sales in that the music content has long been licensed with restrictions, artists should see a 50-50 split, or about 35 cents a song, per their existing agreements.
In recent years, Eminem has been relentless in his efforts to protect what he believes is rightfully his. In 2004, the Detroit-based rapper sued Apple over its unauthorized use of his song "Lose Yourself" in a TV commercial for the iTunes music store. He again sued the iTunes operator in 2007, alleging that his music was converted to digital form and sold through the service without his blessing.
The first suit was later settled out of court for an undisclosed financial sum.
Comments
Eminem most not know that all music is going digital. nobody really purchases cds anymore. (only to use for software like iLife) and thats it. So what that apple used your song in an iPod commercial. If my career was going down the drain, I would be happy if some company was playing my music.
Give me a break. If you need money that bad, go work at McDonalds or something. Get a real job. And leave companies like Apple alone.
Weather you regard mister Em as a viable "artist" or not, if he succeeds in getting the studio to roll over (which is highly unlikely) what a precedent that would set!
less well known musicians might actually make a decent living from their skills and art.
and I'll say it again, before someone else does, when the hell are Apple going to become a record company and give artists the same deal as iPhone devs with the 70/30 split, once they sign up to apple?
I think you're misunderstanding the article, he's not suing Apple for anything, he's suing his own label for taking the same (majority) cut of the profits on digital sales as on traditional sales. This would be an important, and I think positive, precedent for all artists. Why should labels take the same enormous percentage of sales when the expenses and effort involved on their behalf is reduced so sharply with digital downloads?
Let's say that those who pirate music argues that the music industry earns too much and therefore it's ok. Then Eminem and those pirating actually would be heading down the same lane and basically love each other. Provided that it would be fair to pay something the artist.
Just today this was actually the topic in the Swedish court room. Of course the music industri argues that they are badly hurt by pirated music by lower CD sales. But the music industry as a whole is reported to turn over more money than ever. They get their revenue from other activeties. Maybe even pirating drives the sale in other areas than CDs?
The problem with the pirates argument is that if you pirate - no one gets payd. Neither record company or artist. But if the artists would accept a new business model here this could be the future. You produce your music, send it out into free download and then you see to it that earn your cash on what follows!
Would Apple like that?
Eminems argument is interesting indeed - no matter if you like his music or his person!
Artists get more money when their music is licensed vs. when a copy is sold, according to their contract.
What's happening is that UMG is telling Eminem that his music is being *sold* on iTunes. Thus, he gets a lower royalty rate.
However, if you look at the actual details of what happens when you pay money for a track on iTunes, you'll see that you are not purchasing a copy, you are receiving a license to play the track on a limited number of devices, etc.
In other words, when it comes to paying the artist, UMG is calling it a sale, but when it comes to a transaction with a customer, UMG is calling it a license.
Eminem and his management think that if the purchaser is told they are getting a license for the music, and Eminem's contract says he gets a higher royalty rate when the music is licensed, then UMG should be paying the higher royalty rate.
As far as the Eminem bashing in the comments, to each their own. Who cares what you like? I'm not a fan of rap or hip hop, but as a musician I can appreciate what an artist like Eminem does. Wether you like the musical style or not, there is a certain level of talent and creativity in what he does. Do I own any of his music? No. But to say he sucks is just showing your own ignorance and immaturity.
?With the digital download agreements, Universal has no manufacturing costs connected with that, correct??
"Generally, that?s true," the former executive responded. "But it has costs. You don?t call them manufacturing costs the way that term has been used traditionally. Manufacturing costs are for physical costs, and that has gone away."
Generally?!? What kind of goddam weasel word is that? No, it's not 'Generally', it's fucking 'Absolutely' true, you shitbag record 'executive'.
At issue in this case is the conflict between what the record label tells the artist they're getting and what the customer actually gets.
Artists get more money when their music is licensed vs. when a copy is sold, according to their contract.
What's happening is that UMG is telling Eminem that his music is being *sold* on iTunes. Thus, he gets a lower royalty rate.
However, if you look at the actual details of what happens when you pay money for a track on iTunes, you'll see that you are not purchasing a copy, you are receiving a license to play the track on a limited number of devices, etc.
In other words, when it comes to paying the artist, UMG is calling it a sale, but when it comes to a transaction with a customer, UMG is calling it a license.
Eminem and his management think that if the purchaser is told they are getting a license for the music, and Eminem's contract says he gets a higher royalty rate when the music is licensed, then UMG should be paying the higher royalty rate.
this reply should be incorporated into the article.
but then I wager that there would be still people who wouldn't read it, OR understand it
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its not just bad spelling or grammar that are on display on the internet, basic comprehension is apparently dwindling as well
second of all, he has a really good point. Overhead costs are substantially lower for the record companies, but the artists work is the exact same. So shouldn't that mean that the artist should get a greater cut out of digital music?
His other point was good a few years ago, because of DRM, the agreements should be treated more like licensing than traditional cd sales, but that's a very complicated and subtle point and now that iTunes has done away with DRM, its largely moot now anyway.
And we have people getting mad at eminem for suing apple for using a song of his, without getting proper permission? Really? Are you that big of a fanboy that you think apple should be able to not abide by copyright law?
However, if you look at the actual details of what happens when you pay money for a track on iTunes, you'll see that you are not purchasing a copy, you are receiving a license to play the track on a limited number of devices, etc.
QUOTE]
I disagree. It's a purchase, not a lease, since you can burn that track onto a CD, which then becomes unprotected, etc. In other words, you can do whatever you want with that track. Plus, now that the vast majority of iTunes tracks are DRM-free, it's even more clear that a purchase is taking place.
Nonetheless, the way the article is presented, it appears the issue is much more about a splitting the revenues between label and artist, and the purchase/lease issue is another story all together.
I am tired of this dude. He can not rap, and just flat out sucks. we all know your ex is a b***, and that you miss your daughter. we got the message after the third time you "rapped" about it ( what he does is not art. all he does is talk real fast with the tempo to some shitty beat somebody made in a basement)
Eminem most not know that all music is going digital. nobody really purchases cds anymore. (only to use for software like iLife) and thats it. So what that apple used your song in an iPod commercial. If my career was going down the drain, I would be happy if some company was playing my music.
Give me a break. If you need money that bad, go work at McDonalds or something. Get a real job. And leave companies like Apple alone.
You give me a break......
While he has fell off the radar (like most artist's do) he will be back.
I personally feel he is the greatest rappe ever next to Tupac and the Notorious B.I.G.
On the basement beats comment....all of Em's beats have been produced by the great producer Doctor Dre. A legend in the game. A game you are not part of.
Go get Em!.....Do it just to do it.
wow, at the ignorance on display in the comments so far..
Weather you regard mister Em as a viable "artist" or not, if he succeeds in getting the studio to roll over (which is highly unlikely) what a precedent that would set!
less well known musicians might actually make a decent living from their skills and art.
and I'll say it again, before someone else does, when the hell are Apple going to become a record company and give artists the same deal as iPhone devs with the 70/30 split, once they sign up to apple?
Right on, Walter.
wow, at the ignorance on display in the comments so far..
Weather you regard mister Em as a viable "artist" or not, if he succeeds in getting the studio to roll over (which is highly unlikely) what a precedent that would set!
less well known musicians might actually make a decent living from their skills and art.
and I'll say it again, before someone else does, when the hell are Apple going to become a record company and give artists the same deal as iPhone devs with the 70/30 split, once they sign up to apple?
+++
I think Apple are afraid that the labels would pull their catalog of music from iTunes. That's the only reason I can think of.
But yeah what a great deal for Apple and the artists under the scenario you propose. I think its called a 'win-win' deal for both sides.
... What's happening is that UMG is telling Eminem that his music is being *sold* on iTunes. Thus, he gets a lower royalty rate.
However, if you look at the actual details of what happens when you pay money for a track on iTunes, you'll see that you are not purchasing a copy, you are receiving a license to play the track on a limited number of devices, etc. ....
Not true.
True if the music is DRM'ed, not so otherwise. You are buying a digital copy that you can play anywhere and keep forever, pass on to your grandchildren etc. Even though that hardly ever happens and the digital copy is usually history less than a year or so later, that's just because of poor backups, power outages etc. You can in theory keep the music forever.
What I don't understand is why do artists even bother with the old music companies anyway? Why the hell doesn't a mega-rich dude like Eminem just set up his own operation and sell direct to iTunes and off the web?
Even if he personally is locked into some multi-year bad contract, the same theory applies to other artists. These guys are all millionaires anyway and you can buy the recording equipment for peanuts. All they need is one smart guy or girl to stand up and start the revolution and it will be over in a couple of years.