Counting Crows Are Dragging Universal Music Into Court…

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Counting Crows is the latest band to sue their record label over digital downloads.

They’ve filed a lawsuit against Universal Music Group in LA Superior Court, saying:

“Through this lawsuit, Counting Crows seeks to compel Defendant to account to and pay the rightful share of licensing income paid to Defendant for downloads and ringtones of the recorded music licensed by Defendant to these entities.”

Counting Crows claims that songs sold in digital download stores should be classified as a “license” rather than a “sale”, since the track is basically being licensed to the online retailer.  A license might bring a royalty in the range of 50 percent royalty for the artist, whereas a sale could bring in around 15 percent.

Many of these cases have reached a settlement, which has allowed labels to avoid a massive court precedent…

Should digital downloads be treated as a sale or a license?

21 Responses

  1. Yves Villeneuve

    Not a court judge or familiar with governing law, but one might rule these license fees paid to the labels must be shared equally (50%) with artists on a license basis, with interest undoubtedly, since these fees should not have been collected in the first place. The sale of downloads would continue to be shared on sale basis.

    Or if I understand this correctly, a license gives the retailer the right to manufacture as many copies as they see fit therefore artists would receive 50% of a sale.

    In my opinion, a sale is a sale, a stream is a stream, regardless if there are licences or not and licences should always be valued at 0.

  2. Anonymous

    Just read the iTunes terms of service that we all blindly accept every 2 weeks or so. You’re not purchasing the digital files–it’s clearly classified as a license in the ToS.

    • JJ

      Those terms govern the relationship between you and Apple, not the agreement between Apple and the label. It is the latter that governs how the transaction is treated (sale v. license) under the artist’s recording contract.

  3. any mouse

    everyone of these cases is completely dependent upon the specific pre-internet contract language in the artists agreement and their history of amendments and revisions after that. most of these cases are about very fine details, not macro definitions.

    • David

      Up to a point – but law courts are not as pedantic as people sometimes assume. If there is any vagueness or ambiguity about how a contract applies to unexpected circumstances, the courts will try to interpret it in a way that is fair to both sides. In an extreme case, circumstances may have changed so much that the primary purpose of the contract is deemed to be ‘frustrated’, and the court may declare the contract void.

      • Jughead

        I have never seens a rule of contract construction which says a court’s goal should be to be “fair” to both sides–never. Can you cite a jurisdiction where that is used?

        • JJ

          Jughead’s instinct is correct. Courts don’t strive for “fairness” in these cases. They construe ambiguities in the contract against the party that drafted it (usually the label as far as recording contracts are concerned).

          • David

            Fairness (or ‘equity’, or ‘justice’) are guiding values throughout the judicial system. In the Anglo-American Common Law tradition the courts are reluctant to overturn an unambiguous term of contract, even if it seems unfair, unless it is unfair to the point of being ‘unconscionable’. But where contract terms are ambiguous the courts have more scope. You are right that in many jurisdictions there is a principle that ambiguous terms are to be construed against the drafter, but that principle itself avoids the drafter gaining an unfair advantage. There is also a widespread doctrine of ‘implied terms’, which a court may read into a contract to ensure fairness:

          • Jughead

            How does a court “overturn” an ambiguous provision?

            Judges interpret contracts and try to ascertain the intent of the parties–“fairness” has absolutely nothing to do with it. In fact, it is a black-letter principal of contract law that says a court NEVER inquires about the fairness of a deal because people should be free to contract as they choose. 1st year law school stuff.

            If the contract is ambiguous, jurisdictions all have rules of contract interpretation–but being “fair” ain’t one of them. They take parol evidence, look at industry customs, the parties’ prior dealings, whatever—but being “fair” is NEVER on the plate when interpreting contracts.

    • john

      even if it was decided, if a company is still fucking you over and in the wrong you have to still bring their ass to court to have it corrected in your case.

      • Jughead

        Bring a frivolous lawsuit and you risk having to pay the other side’s attorney’s fees as a sanction.

        Nobody is “fucking” anyone–the contract was drafted before iTunes and neither side even thought about whether an iTunes download was a sale or a license.

        Lighten up–the man ain’t trying to kill you, he’s just trying to make a buck for his shareholders. The artist is just trying to make a buck for his retirement. Neither is evil, it’s just commerce.

    • JJ

      The Eminem case just dealt with interpretation of Eminem’s recording contract. Interestingly, that contract wasn’t a UMG-issued contract (it had been assigned/sold to UMG and so UMG had to deal with the language it inherited). All majors’ recording contracts have very broad definitions for “sale”, “record” and the like (e.g., “in any media now or hereafter known throughout the universe”) that captures iTunes transactions (and damn near anything else they want) as sales. In order to upset the industry, you’d need a court ruling that even such broad language is ambiguous. That’s unlikely for a court to decide; and the majors are settling to avoid even the possibility of such a ruling.

  4. Garth Soshahi, CEO- AAMPP

    Music purchased from any digital music store is not purely a sale, there is more to it than that.

    When any company licenses any music/software or physical products from another company for the sole purpose of reduction and selling to the general public to generate revenues, then that is considered licensing.

    The act of any consumer purchasing said product is considered a sale. And royalties are paid based on the consumer buying said product(s) over and over, it’s based upon the companies that license said product for the purpose of generating revenues for itself.

    In most cases, when acquiring a product for licensing; First there is an upfront licensing fee paid to the licensor from the licensee, and then there is an ongoing perpetual percentage paid to the licensor base upon the sales of said product(s). Music is a product, therefore, artists should be paid licensing fees from all music purchased by the general public, because selling music on any digital store is a licensing play.

    • Christopher Hugan

      iTunes downloads are a hybrid of a sale and a license from a legal sense. That is what the 9th Circuit trial and appeals court struggled with in the Eminem case. In remains far from clear in my mind.

      So, I think the issue is decided as far as the 9th Circuit. But, another Circuit may hold otherwise–setting up the potential for review by the USSC. But, the labels/artists may settle without this battle being fought. New contracts address this issue directly, so the whole dispute may wither on the vine.

  5. David

    Let’s not get bogged down in legal technicalities.

    A recording contract is not a peace treaty between warring adversaries. It is meant to be mutually beneficial and cooperative. It goes against the intention of such a contract if one party seeks to exploit the technicalities of the contract to gain an unexpected advantage. In the case of unforeseen technological developments such as streaming, there is a presumption that the benefits of such developments (if any) should not go disproportionately to one party as compared with the other. The decision to switch from one distribution system to another should be neutral with respect to the interests of the parties. So if, for example, one party gains from a switch to streaming while the other loses, this is against the principle of neutrality. More subtly, even if both parties gain, if one party gains more than the other then the terms of the contract need to be revised to redress the imbalance.

    • Jughead

      Nonsense. This only happens in TV shows. Please tell me you are not a lawyer.

      • David

        I am happy to say I am not a lawyer! But then I was not (in this comment) making a legal point, but an ethical one. Even on a legal level, the intentions of the parties may be taken into account in resolving any ambiguity in a contract, and a record company can hardly go into court and argue that its intention was to screw the artist, even if it was!

  6. Yves Villeneuve

    In the end, it’s at the judge’s discretion and ultimately the Supreme Court. Older contracts may have a better case than newer ones following the advent of Rhapsody and iTunes. So far, these types of lawsuits have not been framed as frivolous.