WMG Settles $11.5M Case, Classification of Digital Downloads Remains Unclear…

The question of how artist payouts from digital downloads should be classified has become an ongoing issue. The classification of items such as MP3 downloads and ringtones especially affects legacy artists, who didn’t have this technology included in their contracts.

Weird Al recently settled a $5M case with Sony, he said the label was improperly treating downloads as “sales” instead of “licenses”. Because of this, Weird Al was being paid 15 percent instead of 50 percent.

Warner Music Group is facing the exact same issue. A lawsuit was filed against them in February 2012 by Gary Wright, Ronee Blakely, and Kathy Sledge Lightfoot of Sister Sledge. These artists say WMG underpaid royalties because they also classified downloads as sales and not licenses.

WMG has agreed to settle the case for $11.5 million (minus attorney and court fees).

The settlement is still subject to court approval. It covers sales from January 1st, 2009 through December 31st, 2012. The $11.5 million would be split among artists who opt-in, with producers getting a percentage of the artist payout.

Artists that signed a contract before January 1st, 2002 are eligible. So, the money could potentially be split by thousands of artists. According to the settlement these artists actually generated $381 million in digital sales during the specified time period.

Those who opt-in would also see a change in royalty rates. Artists would get a 5 percent royalty increase, raising them to at least 10 percent and no more than 14 percent.

These settlements come to no conclusion on the digital download classification issue. We’ll continue to see these cases until a decision on “sales” vs “licenses” is made.

4 Responses

  1. JTVDigital

    Well, a download is a “sale” since this is the result of an individual purchase, and the audio file can be permanently stored and used by the consumer/the person who purchased it.
    A “license” is a right of use.

    That being said, giving 15% to artists for digital sales is insane.
    Major record labels just applied the same rules for everything, physical and digital, at a time when digital sales were seen as an add-on only to physical sales.
    Now that’s a different story….even 50% is insane.

    Selling digital music costs close to nothing for the record labels, and the number of units sold is potentially infinite vs. the stock management and manufacturing that is required for physical products.

    Jeremie Varengo – CEO
    JTV Digital

    • Jughead

      The 9th Circuit Court of Appeals disagrees with you. See FBT v. UMG.

    • Guest

      I think you’ve missed the point, Jeremie. As you say, a download is a “sale,’ but the issue is that the record companies have authorized, or “licensed” other entities to make these sales. People purchase downloads from iTunes, Amazon, Google Play, etc., not from Warner, Sony, Universal, et al.

  2. Oinkoink

    Anyone else seeing a connection to the said low payouts from Spotify to artists?