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Dr Elmo joins Sony digital music lawsuit

By | Published on Wednesday 26 July 2006


Dr Elmo, that’s right, Dr Elmo, has joined that previously reported potentially landmark lawsuit against Sony Music in the US. This is the one being pursued by, among others, Cheap Trick and the Allman Brothers Band which relates to the cut of the pie received by artists in the digital music space.

As previously reported, this lawsuit relates to long standing recording contracts entered into by Sony and their artists way before the birth of the iPod or MP3 – ie contracts which do not mention digital music. Those contracts recognise two main revenue streams that labels will capitalize on from an artist’s recordings – the sale of records and the licensing of music to third parties (broadcasters, film studios and advertisers, mainly). Because of the costs associated with releasing records, artists get a much smaller share of the revenue on that revenue stream than they do on licensing arrangements.

And that is the crux of the case. The record labels view the sale of music via download sites like iTunes as an extension of the ‘sale of records’ revenue stream. The plaintiffs view the sale of downloads as an extension of the ‘licensing to third parties’ revenue stream. The distinction is important financially – an artist could expect about 25 cents more per track sold if you adopt the plaintiffs’ viewpoint.

The lawsuit was initially filed in April, but a new version was lodged earlier this month adding ring tone revenues into the mix. Extra artists were listed as claimants on the updated lawsuit, among them Dr Elmo, or Elmo Shropshire, best know for his comedy songs, including his big hit ‘Grandma Got Run Over By A Reindeer’, which is apparently something of a Christmas favourite in parts of the States, and therefore worth a fortune in terms of royalties.

As far as I am aware Sony are yet to comment on this lawsuit. Needless to say, if the artists are successful, this lawsuit could have implications for the entire digital music sector, and not just SonyBMG.