Warners settle digital royalty class action, but Paisley sues Sony for underpayments

May 2014

Artists, recorded music


Another digital royalties settlement seems to have been reached after Warner Music Group agreed to pay $11.5 million to settle a class action lawsuit that alleged the WMG failed to properly credit royalty payments to class members from the exploitation of digital downloads and mastertones of recordings under certain contracts. Sony have already settled a similar action. The plaintiffs, named as the members of Sister Sledge, Ronee Blakley; Simone Johnson Risko; Emlio Castillo; Mikael Johnston; and Gary Wright claimed Warner Music Group failed to provide proper royalty payments to them from digital downloads and mastertones and claimed the exploitation of digital downloads and mastertones should be considered a “license” instead of a “sale” resulting in a far higher share of income to artists. To compensate class members for downloads/mastertones that have already been the subject of a royalty payment, Warner will make available $11.5 million for settlement for income generated between January 1st 2009, and December 31st, 2012. The parties have stipulated that the total U.S. sales by WMG of subject masters as downloads and mastertones for the settlement class for the period is more than $381 million. As defined by the class action settlement, “Royalty Rate Basis” means a calculation based on a percentage of the actual or adjusted suggested retail list price, published price to dealer or wholesale price. “Penny Rate Basis” means a calculation based on a specific cent rate per unit. The settlement agreement also allows counsel to make an application to the court for an award of attorneys’ fees and costs, payable from the settlement fund, in an amount not to exceed $2.875 million and $150,000 in costs. Warner Music Group denies the allegations but reports say that the Company agreed to settle the class action lawsuit to avoid the cost and risk of trial.

In April 2012 Sony settled a similar claim from Artists including Cheap Trick, the Allman Brothers and the Youngbloods.  The Future of Music Coalition estimated that the major labels may have to hand over $2 billion in extra royalties to heritage acts if they lost the cases. The Dixie Chicks put it more simply in their claim against Sony– calling the royalties and accounting process “systematic thievery”.

And country singer Brad Paisley has submitted new papers in an ongoing royalty dispute with Sony Music, in which he claims that the major label has underpaid him by over $10 million. The action began in 2010 when Paisley originally sued, claiming that underpayments dated back to September 2002, when he first renewed his original 1997 contract with Sony. However, the following year a judge dismissed the case, saying that a “tolling agreement” added to a 2006 renewal of the deal meant that by 2011 Paisley had missed his window of opportunity to dispute payments as far back as 2002, and could only raise objections on royalties from January 2006. Despite the ruling, Paisley’s legal team argues that the musician had only signed up to the “tolling agreement” on the promise that Sony would release the documents they needed in order to audit payments, which the major then did not provide. According to RadarOnline, the new lawsuit states: “The primary reason that Paisley is commencing this action is because Sony continuously has refused Paisley access to a variety of information and applied incorrect royalty rates, prices, and reductions, pursuant to the recording agreement, resulting in Sony’s significantly underpaying Paisley” and that a 2006 audit which

uncovered the underpayments on 2002-2005 royalties could not be completed because Sony did not provide complete records with a claim that “Sony has continually failed to discharge its contractual duty to Paisley”. he musician is now suing for breach of contract and seeking an injunction forcing Sony to release the documents that have been allegedly withheld along with damages and interest.






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