Business News Digital Royalties Timeline Labels & Publishers Legal

Data squabble underway in Universal’s ongoing digital royalties battle

By | Published on Thursday 2 May 2013

Universal Music

Artist confidentiality has been raised as a new issue in the ongoing legal squabbling between Universal Music and a consortium of its legacy artists in America over digital royalties, as the plaintiffs try to gather information together to help justify their litigation being a class action. The mega-major continues to fight moves to give the case class action status, in addition to its efforts to have the entire claim dismissed.

But first, some background. As much previously reported, there has been plenty of debate – principally in the US to date – on whether download revenues should be treated as ‘record sales’ or ‘licensing income’ when labels pay royalties to artists whose record contracts pre-date digital and therefore make no specific reference to the sale of MP3s and AACs. It’s a crucial difference because artists are often paid a much bigger share of licensing income than record sales money, mainly because traditionally the latter was so much lucrative than the former. Needless to say, the majors are paying the smaller record sale royalty on downloads.

Early legal action on this issue was inconclusive, but then in 2010 the US courts ruled in favour of FBT Productions, early Eminem collaborators who are due a royalty on Slim Shady’s early recordings, and who said they should get the higher licensing royalty on downloads. The mega-major subsequently agreed new digital royalty terms with the producers last year. But the music giant maintains the FBT case doesn’t set a general precedent on digital royalties, though a plethora of heritage artists – signed to both Universal and the other majors – disagree and have begun legal action citing the Eminem case.

For Universal the biggest such lawsuit is being led by Rob Zombie and the estate of Rick James. They want to make their case a class action, which would mean that any artist signed to Universal before iTunes with something nearing a standard record contract would be able to claim higher digital royalties if the Zombie/James lawsuit was successful.

Universal disputes Zombie and the James estate’s royalty arguments, but even more so their attempts at making their litigation a class action, and the music firm’s lawyers cited various issues with that in their initial unsuccessful attempt to have the entire lawsuit dismissed. But with class action status still a possibility, the plaintiffs are now trying to counter all the arguments against the lawsuit being give such a certification.

And to that end they want access to digital accounts from Universal, outlining what kind of revenue different artists are receiving, both in terms of percentages and pay out amounts. Obviously the terms of any one artist’s royalty agreements with the label, and the monies they receive, are covered by all sorts of confidentially agreements. No problem says the Zombie/James legal team, only the plaintiff’s attorneys need see the data, and they’d sign NDAs.

But, says Universal in a new court filing, given the size of this case that means 50 or so lawyers, all of whom work in the music industry, possibly for competitors of the mega-major, or for artists who have personal or professional issues with acts signed to the record company whose confidential accounting information would be shared. So such a data share isn’t viable, say Universal’s lawyers.

Needless to say, the plaintiffs ain’t impressed with the Universal’s data hold out. According to Billboard, they counter in their own court filing: “It is ironic that UMG continues to press for more information about how plaintiffs will calculate their damages, but seeks here to deprive plaintiffs of important data plaintiffs can use both for internal analysis of class certification theories, and to illustrate for the court available methods for calculating damages for any class or subclass. Plaintiffs should not be handicapped in these tasks”.

It remains to be seen how the judge overseeing the case responds.