It’s been a tough month so far for Universal Music Group, as heavy-hitting artists appear to be lining up to file law suits against the music giant. At issue: licensing fees.
Eriq Gardner reported for Billboard that White Zombie Frontman Rob Zombieand the estate of Rick James’ class-action lawsuit regarding underpaid royalties would go forward. According to the article:
The lawsuit was filed in April and came on the heels of previous litigation that opened the question of how labels should be treating digital music distribution.
UMG and other labels believe that when consumers download song recordings via the Internet or on a mobile phone, it constitutes a “sale.” Many recording artists, on the other hand, note there’s little manufacturing cost involved and consider what’s happening to be a “license.”
The difference between a “sale” and a “license,” for accounting purposes, is huge. If the record labels are correct, they only need to pay artists a royalty rate that’s roughly between 10 and 20 percent. If artists get their way, the revenue apportionment is much closer to a 50/50 split.
Rap icon Chuck D of Public Enemy has also filed a class-action lawsuit against UMG, pursuing unpaid royalties on digital downloads and ringtones. According to and article by Tim Kenneally that was distributed by Reuters:
According to the suit, Universal’s artists and producers are entitled to 50 percent of the net receipts from digital downloads and ringtones.
However, the suit alleges, the company has treated such transactions like sales of physical product. Meaning that not only is there a much lower royalty rate involved, but the company makes deductions for things like containers and packaging — which aren’t an issue for digital downloads or ringtones.
The difference, the suit claims, is massive.
According to Ridenhour’s (Chuck D’s) claim, under UMG’s current method of accounting, artists and producers receive $80.33 for every 1,000 downloads, when the correct amount should be $315.85 per 1,000.
On the ringtone side of things, the discrepancy is even more drastic. The suit claims that UMG’s current accounting method yields $49.89 per thousand downloads, as opposed to the $660 per 1,000 that the suit claims is actually owed.
Ridenhour, who claims breach of contract, is demanding a jury trial.