The estate of 1950’s pop star Ricky Nelson is taking legal action against Sony Music over the way the artist’s streaming royalties are calculated and the level of deductions (royalty reducers) are applied to earned revenues as the income moves its way around various regional subsidiaries, before calculating what the artist is due under the terms of their record contract in their home country.
In the days of physical product distribution, record labels would justify these deductions as releases were undertaken on a country by country basis with associated costs and risks. Now we have truly global music companies, and global streaming – and many artistes argue that these reducers (and many others) are unjustified and unjustifiable. Not all labels do this, but some do.
The Nelson estate accuses Sony of applying the “intercompany charge” on international streaming revenue before calculating the royalties they are due. It appears the estate has no problem with such deductions where a third party company involved which is making the additional charges, but it argues that international deductions are not allowed under Nelson’s record contract where another Sony Music label
According to Law360, the The lawsuit, which was filed Tuesday in the U.S. District Court for the Southern District of New York, says that, because of the international deductions, Sony “impermissibly takes up to 68% off the top of the international revenue earned from streaming sales, and bases the artist’s royalty rate on the remainder”. Because it is usually other Sony subsidiaries making the deduction, they add, Sony “does not have a contractual or equitable right” to deduct money in this way.
The estate is pushing for class action status for its lawsuit. A 2011 lawsuit against estate Capital Records, then still part of EMI over allegedly underpaid royalties was seemingly settled