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Sony fails to knock out 19’s Idol stars lawsuit

By | Published on Wednesday 18 March 2015

19 Entertainment

Sony Music has failed to have a wide-ranging lawsuit filed by 19 Entertainment a year ago dismissed, though some elements of the case have been thrown out.

As previously reported, ‘American Idol’-owning 19 Entertainment, which also manages many of the finalists that appeared on the talent show franchise, last year sued Sony Music, which traditionally signed ‘Idol’ winners, claiming that it had found “systemically incorrect calculations” on two separate audits of royalty payments made by the major. It then added that the record company had failed to allow 19’s bean counters to access all the data they required to do a full audit.

Sony responded a few months later with a motion to dismiss, countering the various allegations made by the management company. But in a ruling this week, a New York judge said a big chunk of 19’s lawsuit should be allowed to proceed to court, though some elements were removed.

As previously noted, 19’s litigation includes one of the big fat debates of the moment in artist management circles, whether digital income should count as ‘licensing’ or ‘sales’ income with artist contracts that don’t specifically mention downloads and/or streams.

It’s an important distinction, because artists traditionally get a much bigger cut of the loot with licensing money that they do with sales income. Labels say that downloads and streams should be classified as sales for royalty purposes, but many heritage artists point out that what the labels negotiate with iTunes and Spotify are definitely ‘licensing deals’.

And this issue is one that will be allowed to proceed, potentially giving more court time to a dispute that has been subject to countless lawsuits and artist/label deals (some public, most under the radar), but which has generally had little judicial consideration, except in the famous FBT Productions case against Universal, which the majors have always insisted doesn’t set a precedent.

Among the other elements of the case also allowed to proceed is another favourite with artist managers and lawyers, the way labels sometimes confuse things when money moves between global subsidiaries, this time in relation to advertising spend. 19 accuses Sony of using “sleight of hand” tactics to reduce its royalty obligations to its artists. There was enough confusion here to justify proper court consideration, said the judge this week.

But not all of 19’s grievances will remain in the case, perhaps most notably the firm’s claim that it should have received at least $1 million from Sony Music’s various file-sharing legal settlements, such as that with LimeWire, yet another common gripe amongst artists and their managers. On that point Sony was right to say 19 had no entitlement, the judge ruled.

All in all, plenty of good stuff to make this case very interesting indeed, providing pesky out of court settlements don’t stop these issues getting a public airing. But for the time being, 19’s lead legal man – a certain and presumably still smiling Richard Busch – told The Hollywood Reporter: “We now look forward to litigating these claims”.