Universal counter artist digital royalty demands with confidentiality claim

June 2013

Artists, record labels


The issue of commercial confidentiality has been raised  in the ongoing legal battle between Universal Music and a consortium of its legacy artists in America over what digital royalties the major should be paying its acts, as the plaintiff artists 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). The main action, led by Rob Zombie and the estate of Rick James.  Are seeking to make their case a class action, which would mean that any artist signed to Universal  with a standard record contract would be able to claim higher digital royalties if the Zombie/James lawsuit was successful. Universal  treat income from downloads as “sales” instead of “licenses” allowing for substantially lower payments to be made to artists.

The plaintiffs want access to digital accounts from Universal, outlining what kind of revenue different artists are receiving, both in terms of percentages and quantum of payments.  Understanding that such terms and data will be confidential,  the Zombie/James legal team say that only the plaintiff’s attorneys need see the data, and that they would all sign Non Disclosure Agreements. But Universal  have countered saying that this confidential and commercially sensitive  information would be available to over 50 specialist music industry lawyers, who quite possibly could work 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 are not impressed with UMG. 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”.

The matter is important – the pleadings in the case brought by Cheap Trick and The Allman Brothers against Sony showed the dramatic uplift in income from recorded music where the licensing model was used when compared to the sales royalty model which is already erduced and then reduced further by deductions and contractual ‘royalty reducers’. Universal have already lost once on this issue – in the case brought by Eminen producers FBT in the US. And there is a growing list of acts queuing up improve their often meagre revenue streams. Post ReDigi it does seem somewhat hypocritical of (although hugely beneficial for) the major labels to treat the ‘sale’ of a download as a licence to consumers – but as a ‘sale’ when accounting at lower royallty rates to artistes.

It’s interesting to note that when it comes to accounting to artistes, the major labels are convinced that digital sales are sales like a CD – and  NOT a licence – but when it come to blocking consumer re-sales (the ReDigi case) the labels are convinced digital ‘sales’  ARE a licence. Hmmmmmmmm, are the majors ‘having their cake and eating it’ ?




and on ReDigi see http://www.the1709blog.blogspot.co.uk/2013/05/intangibles-and-exhaustion-redigi-and.html

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