I have been arguing this point for years as anyone taking one of my classes at Berklee can testify. This past week, rapper Eminem and his former production company F.B.T Productions won a significant digital royalties lawsuit granting the artist and production company a 50% split of revenue from digital downloads and ringtones. Universal Music Group will be required to pay a higher share of royalties for downloaded music or on ringtone sales according to a recent ruling by a federal appeals court.
This is a potentially HUGE change from how the recorded music industry’s business model works. This new ruling may now mean that digital copies of music are digital “masters,” which command a much higher royalty share than single or album “sales” do.
When consumers purchase a download from iTunes, they are actually “licensing” the song for playback within certain boundaries. According to many label contracts, licenses are to be treated as splits, perhaps split 50/50 between artist and label. To date, that has not been the case as downloads via iTunes and other sites have been treated as “sales” of copies of the song, rather than a license of the “master recording”. Eminem and company challenged that assumption.
The labels have been accounting as if a download was the same as the sale of a single, using the existing contract language to define the payments.
Publishing and licensing may turn out to be of great benefit to artists and writers for digital music. If songwriters and artists band together, they can leverage the licensing provisions in their existing contracts to extract their fair share of digital revenue. New contracts and constructs can approach the transaction from a licensing point of view. Artists and writer have the upper hand when it comes to new music and new deals.
This ruling could truly be revolutionary for the creators of content if it holds up. Think of it this way. If an artist can directly license their music to iTunes and keep approximately 70% of the proceeds from each transaction, then why should they be paid 8-12% for music that their label licenses to iTunes? Shouldn’t the money paid to the label at least be split 50/50? If this ruling stands up to appeal and becomes more broadly interpreted, artists and writers will benefit greatly, and deservedly.