Last year there were about 650 million downloads of “catalog” singles in the United States, meaning songs more than 18 months old, compared with 523 million for current tracks, according to Nielsen SoundScan. For a decade, music labels have been treating downloads of these catalog singles as sales rather than licensing transactions.
What’s the difference? Well, artists who signed their record deals before the advent of the digital download—like Marshall Mathers (rapper Eminem), who signed in 1995—often get significantly more for a license deal than they do for a unit sale. From The New York Times:
Four years ago, the producers who discovered Eminem sued his record label, the Universal Music Group, over the way royalties are computed for digital music, which boils down to whether an individual song sold online should be considered a license or a sale. The difference is far from academic because, as with most artists, Eminem’s contract stipulates that he gets 50 percent of the royalties for a license but only 12 percent for a sale.
The courts recently decided in favor of Eminem’s producers, determining that a digital download more closely resembles a licensing deal:
“Unlike physical sales, where the record company manufactures each disc and has incremental costs, when they license to iTunes, all they do is turn over one master,” said Richard S. Busch, a lawyer for F.B.T. and Mr. Martin’s company, Em2M. “It’s only fair that the artist should receive 50 percent of the receipts.”
The Supreme Court refused to hear an appeal on the case last week, so it looks like a big victory for aging recording artists (and their estates) everywhere.
“The labels make tens of millions of dollars a year from the deep catalog without paying a penny in promotion costs,” said [Nashville Lawyer Mr. Fred] Wilhelms, who estimates that the Eminem ruling might apply to tens of thousands of artists. “Anybody who ended their recording career before 1978, and probably before 1992, is in the decision,” he added.
—photo by courtneyBolton/Flickr