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Universal win Shady tunes court fight

By | Published on Monday 9 March 2009


The Universal Music Group has won the previously reported and potentially landmark court case between it and FBT Productions, the company owned by producers Marky and Jeff Bass who were very involved in the early career of Eminem, and who have a royalty entitlement to Slim Shady’s early releases via Universal’s Interscope division.

As previously reported, the FBT v Universal case centres on the level of digital royalties that are due to artists and their collaborators. Record companies treat digital sales like physical sales, and pay artists a relatively modest cut of revenue as a royalty – 12% in this case. But FBT argued that digital sales are more akin to licensing deals where record companies licence the use of their recordings, normally to media or brands, rather than selling actual copies. It’s a crucial distinction because most artists are due a much bigger cut of revenues generated by such licensing deals, 50% in this case.

Had FBT won this case, it could have had big ramifications across the record industry, because labels selling digital music by any artist whose record contract is too old to specifically reference downloads could argue they should be getting the higher licensing royalty rate for any digital sales. Coming as record companies rely increasingly on their own digital revenues to make the books balance, to suddenly have to pay out significantly higher royalties to artists could have been crippling.

So good news, for Universal et al, that the Federal jury in this trial sided with the major record company over the hip hop production outfit. Summarising their ruling, US lawyer Fred Davis, who was not involved in the litigation, told the LA Times: “[The jury is] saying that the digital download is the modern version of a record sale. And the economics to the artist are the same for a digital download as they were for the sale of a single, back in the glory years”.

The Bass brothers’ lawyer told reporters his clients were reviewing their options, adding: “We are very surprised by the jury’s verdict. We don’t understand it, and the fight’s not over”. Rulings made in a federal district court like the one that heard this dispute are not binding, so future similar lawsuits in other US courts could go another way – and, as previously reported, the Allman Brothers Band and Cheap Trick have an ongoing legal dispute with Sony Music on the same issue. That said, the ruling in this case will be persuasive and will surely be referenced by the labels in any future litigation on the matter.