Thursday, November 3, 2011

Chuck D Wants His Royalties

Chuck D image from Bobby Owsinski's Music 3.0 blog
We all knew that this was going to happen, that sooner or later the floodgates would open. Now Public Enemy frontman Chuck D has filed a class-action lawsuit against Universal Music Group in U.S. District Court in Northern California on Tuesday, alleging that the music giant has short-changed its artists and producers in licensing deals for digital downloads and ringtones. The suit alleges that Universal owes its artists "hundreds of millions of dollars in royalties" because of the discrepancies.

This was all thanks to the fact that Eminem's production company, FBT, won a decision against UMG over what amounts to the definition of ownership of a digital file. FBT claimed that UMG owed them a lot more money for each download sold because a digital file sold by iTunes or Amazon MP3 is actually a license. UMG insisted that regardless of whether it's a CD, vinyl record, or digital file, Eminem's music is part of their distribution deal. Eventually UMG lost the decision, and now we're going to see more and more artists suing to take advantage of decision.

The difference between a license and royalty is pretty great. An artist can expect only between 10 and 20% (if they're lucky) of the revenue from a digital sale under a normal royalty agreement, but 50% under a license agreement.

According to Chuck D's claim, UMG's current method of accounting pay artists and producers $80.33 for every 1,000 downloads, when the correct amount should be $315.85 per 1,000. For ringtones it's even more drastic. 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.

You can expect that UMG is going to go down fighting, but this might be already lost. I bet that their strategy is to try to outlast them in court, but if Chuck D wins, UMG might be in big trouble. It could be the beginning of the end for the biggest record label still left standing.
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