Digital Royalties Timeline Legal Top Stories

Appeal court rules in Eminem producers’ favour in Aftermath digital royalties dispute

By | Published on Monday 6 September 2010

So, this is interesting, though it remains unclear for now as to whether this ruling will set any sort of wider precedent regarding ambiguities in pre-internet record contracts.

An appeal court in the US has overturned a lower court decision regarding a dispute between Universal’s Aftermath Records and the producers who first launched the career of a certain Eminem. As previously reported, when Aftermath signed Slim Shady, the production company who had previously been working with him prior to the deal – FBT Productions – got a slice of the artist’s revenue share on some of the rapper’s early recordings.

Because this all happened pre-web, the contract did not specifically mention income from download stores like iTunes, or what share the artist (and therefore FBT) should get from such sales. Since iTunes came along Universal have been treating download sales as being equivalent to CD sales.

But FBT argued that when Universal licensed Eminem tracks to Apple et al they were doing ‘master licensing’ deals. This distinction is important, because generally artists get a bigger share of revenues generated from master licensing than they do from record sales. In the case of Eminem and FBT, 50% instead of 12%.

FBT weren’t the first beneficiaries of a pre-web record contract to argue that digital downloads should be classified as ‘master licensing’ arrangements rather than record sales, though other back-in-the-day artists who have gone legal have, in the main, not been overly successful (though at least one high profile case rumbles on, I think). And FBT also lost their initial legal action on this issue, when a US court denied their application for a pre-trial ruling in their favour.

But last week an appeals court overturned that decision, saying the lower court were wrong to unequivocally accept Universal’s interpretation of the Eminem contract. Universal are reportedly planning to request a second hearing in the appeal court, though may now have to pay out a bigger revenue share on the Eminem tracks in which FBT has an interest.

Though, of course, this whole story is of more interest if any ruling in FBT’s favour could be applied to other bands with pre-web recording contracts where the pay out on licensing deals is much higher than on record sales. Needless to say, Universal were quick to state that this ruling – even though they plan to fight it – only related to the specific wording of the Aftermath/FBT agreement, and could not be applied to other deals.

The major’s Peter Lofrumento told Bloomberg: “It should be noted that this ruling sets no legal precedent as it only concerns the language of one specific recording agreement”. So, that’s alright then.

We should stress that, despite some reports to the contrary, Eminem himself was not part of this litigation. He was far too busy this weekend parading on stage a guest list that included Drake, 50 Cent, D-12, BoB and Dr Dre at the first of his co-headline shows with Jay-Z to be bothering about tedious royalty disputes.