Wednesday, January 30, 2013

Universal Music Settles Key Fight Over Eminem Royalties... With Secret Agreement

from the of-course dept

For years, we've been covering a key legal fight in the music business, involving Eminem's producers, FBT, and Universal Music, over how much was owed on iTunes sales. The key issue: is an iTunes purchase a "sale" or a "license." Older music contracts that predated the internet era tended to focus on sales, in which artists tend to get about 15% royalties. "Licenses," on the other hand, tended to be for things like commercials or movies, but commanded around 50% royalties. But when you talk about iTunes songs, you can make somewhat compelling cases that it's either a sale or a license, depending on which details you focus on. Universal Music, of course, insisted that it was just like a CD sale. FBT argued it was just like a license. There are a ton of other similar lawsuits ongoing, but after losing at the district court level, FBT won on appeal. That resulted in a somewhat insane and contentious fight over how much Universal would have to pay up, with a judge slamming Universal for hiding revenue with tricky funny money accounting, and even trying to expense the cost of this very lawsuit back against what they owed.

However, the damages phase of the case was set to go to trial in the spring, and it would have (1) revealed an awful lot about the blackbox of Universal Music's accounting practices and (2) given a roadmap for the many other similar lawsuits against Universal Music (and the other major labels). Given that, it should come as no surprise that Universal Music scrambled to come up with a way to get FBT to settle... with the terms of the settlement being secret. This almost certainly means that UMG paid through the nose, with the hope that it makes it more difficult for other artists to get similar rewards, and while allowing Universal to keep its secrets secret... for now.

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