Monday, November 07, 2011

Chuck D and How Record Labels Pay Royalties

Universal Music lost its digital royalties case to Eminem.  Universal had been claiming in all ways, except with regard to playing royalties to musicians, that iTunes (also includes other digital sales and ringtones) purchases were licenses as opposed to sales.  A sale, according to Universal, was a physical unit such as a CD.  A license is typically the use of a song in a movie or TV show and as such, labels typically give higher royalties to musicians for licenses as they do not require any extra spending from the label (for packaging, marketing, etc). 

All of this brings me to the Techdirt post from a few days ago, which very clearly lays out the case Chuck D is making against Universal.  He wants to be paid for his iTunes sales as a license, not a sale.  According to the article, Chuck D is receiving  $80.33 for every 1000 units sold.  As his lawsuit claims, his rightful royalty payment should be  $315.85 for every 1,000 units sold.

This could have huge ramifications for major labels.  Their accounting to the artists has always been sketchy at best.  I've heard of big name artists who would audit the labels every 4 years and walk away with a couple of million dollars.  I don't believe there were any artists or managers who were deluded about this accounting practice. We were all aware of it.  Since the bands I managed never relied on royalty payments and didn't sell in the millions of units, it was a moot point.  It would probably cost more to hire a lawyer, then finding what might be a long lost royalty payment.   

It's great to see Chuck D pursuing this.  If these bigger artists can pave the way, it might mean a bit more transparency from the labels. 

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