Eminem

A trial that will help define what percentage of digital royalties an artist is entitled to has finally arrived after a two year journey through the judicial process.   Rap artist Eminem and his publishing company FBT Productions have sued Universal Music Group for $1.6 Million in alleged unpaid royalties.  Digital royalties are earned by an artist whenever music by that artist is downloaded online or through a ring tone for example.  The percentage of royalty payments that an artist and label will receive are usually included in an artists contract.  However for artists and labels that have been around long before the digital revolution arrived, determining who gets what percentage of the digital royalties becomes a concern.  Before ipods and ringtones became mainstream there were no contract clauses in an artists contract discussing digital royalties.  The dispute between Eminem and Universal seeks to define whether the digital music will be considered a license or a further distribution of the music.

“Eminem’s lawyers argue that downloads should fall under the “licensing” agreements that cover physical releases such as CDs and vinyl records, but Universal Music Group says they are governed by “distribution” arrangements, which have lower royalty rates.  Whereas an artist might split licensing royalties 50-50 with their label, under distribution rates they often earn less than 30%.” http://www.guardian.co.uk/music/2009/feb/25/eminem-universal-digital-royalties-lawsuit

“If you give the music to a third party without cost to you, like manufacturing or packaging, that’s the same as a licensing agreement,” a member of Eminem’s legal team explained to The Wrap magazine. “[Universal] are characterising it as something else.” http://www.guardian.co.uk/music/2009/feb/25/eminem-universal-digital-royalties-lawsuit

I have to side with Eminem on this one.  Universal is not actually distributing any of the music, they are just allowing a third party such as iTunes to put the music on their servers.  There is no difference from releasing an actual CD and releasing a CD to the Internet.  If however Universal played a major role in getting the music into a third party’s hands and actually “distributed” and marketed the music, then Universal could come out victorious.  The affect on other artists may turn out to be a case by case issue, hinging on whether a label significantly distributed and marketed the music.  In the end I think this will be a major win for all artists worldwide who have never been able to take advantage of all of their digital royalty rights.

UPDATE:  Eminem loses case to UMG http://www.thewrap.com/article/1750.  This is a big blow to musicians worldwide.  I am sure this issue will come up again and if anything the public is more aware of the issue.  As a consolation Eminem did receive $159,000 in accounting errors from the payment of royalties.