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Universal proposes settlement in long running digital royalties dispute

By | Published on Thursday 16 April 2015

Universal Music

Phew, all three of the major labels might just have their long running disputes with artists over download revenues fully resolved at least three and half weeks before the bottom falls out of the download sector and the whole selling-MP3s-thing speeds into oblivion. As expected, Universal Music has followed the lead of Sony and Warner in filing proposals to settle class action lawsuits in the US over what split of download income labels should pay to their artists.

As much previously reported, labels often pay artists the same split of revenue on downloads as they do with CDs, but many artists argue that the record companies’ costs and risks are less with digital. Moreover, pre-digital record contracts often made a distinction between ‘sales’ income and ‘licensing’ income, paying the artist much less on the former. Labels treat downloads as sales, but artists argue download income relates to ‘licensing’ deals done with the download stores.

Various artists took legal action on this issue, the most famous case being between Universal and early Eminem collaborators FBT Productions, a legal battle which the producers ultimately won. But Universal insisted that case did not set a wider precedent, even as a plethora of lawsuits citing the ruling in the FBT judgement were filed, and Sony and Warner started to quietly negotiate out of court settlements with their angry heritage artists.

But it emerged last month that Universal, having failed to get the digital royalty lawsuits filed against it dismissed, was now in settlement mode. According to The Hollywood Reporter, the mega-major is now proposing to set aside $11.5 million to settle with artists who believe they have been underpaid on download income to date, while committing to pay slightly more on downloads moving forward.

Though, as with the Sony and Warner settlements, the increase is modest. Universal will reportedly make the split paid on downloads 10% higher than what is paid on CDs, so that if an artist is on a 15% split on a CD sale, they’ll get 16.5% on a download.

Which is someway off the 50% the artist could see if downloads were truly classified as licensing income. But there is an extra incentive, in that Universal will reform the way it deducts costs off income before any split occurs, another common bugbear of artists, especially when deductions seem to apply to things that are only really relevant in the physical product domain.

Of the $11.5 million, about $3 million will go to the lawyers, while artists specifically named on digital royalty lawsuits could see a one off $200,000 payment, with the rest divvied up between artists with similar contracts.

Which isn’t anywhere near as radical a redistribution of the monies as some hoped when the digital royalty debate first began though – as with the Sony and Warner settlements – it’s thought many artists will accept the modest income boost, rather than pursuing expensive full-on litigation which could run for years, just as the download market is going into freefall. Meanwhile the biggest artists with more resources could well have scored secret backroom deals that are more favourable.

The mega-major also accepts no wrong-doing as part of the settlement, saying in a statement: “Although we are confident we appropriately paid royalties on digital downloads and adhered to the terms of contracts, we are pleased to amicably resolve this matter and avoid continued legal costs”.

Amongst the specific artist lawsuits that would be subject to the settlement – if it is accepted by the courts – are Chuck D, Rick James, Traffic, Whitesnake, The Temptations and Motels.