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Warner streaming royalties dispute denied class action status

By | Published on Monday 2 March 2020

Warner Music

A Californian court has knocked back efforts by 1970s soul singer Lenny Williams to make his royalty dispute with Warner Music a class action. The judge agreed with the major that there are too may specifics in Williams’ dispute to have the case equally apply to all artists signed to the Warner Bros label in the US.

Williams, who fronted R&B group Tower Of Power, sued Warner in 2018 accusing the music firm of various violations in relation to a dispute over how it calculates and pays streaming royalties to artists. Since then Warner has managed to have some of the case dismissed, though the core allegation remains.

The case centres on what happens when streams generate income in markets other than the US. Monies often pass through local subsidiaries of the major before being passed back to Warner Bros in America, which then has to share that money with its artists.

Williams claims that the local subsidiaries make deductions as money passes through their bank accounts, and that Warner Bros then calculates his royalty based on what it receives in the US. But, the musician argues, his percentage share of the money should be calculated based on the at source payment from the streaming service.

It’s one of various common gripes artists have about the way streaming royalties are paid by labels, especially on old record contracts that don’t have any specific provisions regarding digital income. Different record companies have different policies regarding how artist royalties are calculated when monies pass through international subsidiaries.

Williams wants to make his lawsuit a class action, meaning that – if he was successful – other artists signed to Warner Bros in the US could likewise benefit from the precedent that would be set, demanding that international royalties be calculated based on at-source income.

The question is, what artists would qualify to be part of that class? In Williams’ lawsuit he identifies three groups of artists based on the kind of record contract they have with the major. The first group would have more modern contracts that mention streaming. The second group would have pre-digital contracts that don’t mention streaming, but which do talk about ‘licensing income’ (which, artists would argue, should apply to streams). And the third group are artists with record contracts that don’t mention streams or licensing.

Williams himself falls into the latter group, which makes his claim more complicated. Because, as the judge noted in his decision last week, Williams needs to prove three things. Not only that his royalty should be calculated based on at-source income, but also what his streaming royalty rate should be. And that he is even due a share of digital income to start with, given his record contract only talks about royalties in relation to physical copies.

The judge wrote: “The court shares Warner Bros Records’ concern that plaintiffs will have to spend considerable time litigating an issue not shared by the proposed class as a whole – whether contracts falling within this third category even require WBR to pay royalties for digital streaming”.

He went on: “Although plaintiffs may not be the only class members to grapple with this defence, there is a danger that the majority of the proposed class members will suffer because plaintiffs will be engrossed with disputing WBR’s arguments regarding plaintiff’s individual case”.

The dispute between Williams and Warner itself continues of course, but any conclusion in that case – if it went in the former’s favour – would not now have an impact on the major across its entire catalogue. Though, of course, an artist who is in one of the first two groups identified in Williams’ case could try to pursue their own class action.