Exclusive: UMG Executing “Sinister Plan” to Block Royalty Challenges

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Back in September, the US Ninth Circuit Court of Appeals dealt a heavy blow to Universal Music Group – and in turn, the other major labels.

Specifically, the court sided with Eminem publishing group F.B.T. Productions and found that digital downloads should be counted as licenses, not sales.  That re-categorization could create a devastating cost increase for UMG and the other majors.

In fact, in a subsequent interview at CMJ in New York, music attorney Steve Gordon told Digital Music News that as many as 90 percent of legacy artists are subject to receive as much as 50 percent of digital download royalties – retroactively, and in the future.  The exact figure has been debated, though most agree on ‘a lot’ as a general descriptor.  And ‘a lot’ is a serious problem for big label balance sheets.

Predictably, artists and their handlers are starting to prepare challenges – and potentially capture huge gains on download sales.  But according to sources inside the mega-label, UMG lawyers are executing a “sinister plan” to scuttle those challenges.

Specifically, the legal team has launched a time-consuming appeal to the US Supreme Court, a situation that makes it difficult for artist attorneys and managers to effectively launch claims.  This is a detailed, technical petition that could take time – maybe ‘a lot’ of time.  “The Supreme Court challenge makes everything uncertain,” one artist attorney told Digital Music News this week.  “It may get shot down, but no one wants to waste money until it’s resolved.  It’s a sinister plan.”

So why not just wait it out?  Well, here’s where the plan gets downright Machiavellian.  According to sources, UMG lawyers are attempting to keep the case in limbo for an extended period of time – and trigger statutes of limitation in the process.  Opposing lawyers will certainly try to work around that mess, but this could represent a serious roadblock for some. “It’ll be different in every case, but it’s certain to make everything more complicated,” the attorney relayed.  And, potentially save Universal a lot of money.