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Chuck D reveals record label accounting in download royalty lawsuit

Written by Rich Fiscus (Google+) @ 04 Nov 2011 20:11 User comments (8)

Chuck D reveals record label accounting in download royalty lawsuit Chuck D of Public Enemy fame is the latest artist to sue his label alleging they are cheating him out of royalties from music downloads.
The issue, as with other artists who have sued, is whether downloads, including those from services like iTunes or Amazon's MP3 Shop as well as ringtones, should be counted as sales or licenses.

It's an issue which could cost the labels a lot of money due to the fact pre-iTunes recording contracts do not, obviously, have any royalty terms for downloads. In a similar case involving Eminem, a federal appeals court ruled that downloads clearly count as licensing, rather than sales.

This is significant because the royalty rate for licensing is much higher. Based on the contract terms disclosed in Chuck D's lawsuit, Universal Music Group would be required to pay him almost 50% of all the money they collect from each download.

Essentially, this is a case of the labels wanting to treat downloads in whatever way gives them the most power and makes them the most money. On one hand, they argue downloads are not sales when a consumer wants to sell them. Therefore the first sale doctrine does not apply. But when they pay the artist, they argue the opposite case, calling them sales to pay lower royalties.

Since this lawsuit was filed as a class action, the result could have an impact far beyond Chuck D. If successful, he could end up winning royalties for every artist being short changed by UMG's faulty accounting.

Even more interesting is the fact Chuck D's lawyers have laid out the exact calculations actually used for royalties under both frameworks. If you have never seen the terms of a standard recording contract, you may be shocked at how little the royalties are.

Keep in mind, these are the terms after he renegotiated them as a major star. Where his nominal royalty rate for sales is 24%, the common rate for lesser acts is around 10-11%. But even at his very high royalty rate, he still makes barely more than $80 for every 1000 songs sold.

If you recalculate that at a more standard 11% rate, it would be less than $37 for 1000 downloads, with the label keeping more than $550 for themselves. At the higher licensing rate, which would be the same for either type of contract, the artist gets more than $300 for the same sales.

But don't take my word for it. Here are his figures:

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8 user comments

14.11.2011 20:40

Fight the power!



25.11.2011 5:31

If you want to support an artist, send that artist a check and then pirate their music.



35.11.2011 9:17

It's not that dear to produce yourself these days people just think it's really hard as you don't have any major outlets to get your stuff get heard on now.

45.11.2011 9:29

I look at this way, if labels make $ off downloads and it don't cost them jack to put up; then yes a portion should be given to artists no questions ask. Otherwise all songs on the net should be free with nobody profiting.

55.11.2011 12:36

Not to be one for "I told you so", but indeed... I have been telling you folks this for months that this is how these bastards do business.

It is all the more reason why I support the efforts of Radiohead. Self support when you can. Your fans will indeed pay their way. All you have to do is get one (1) honest person to show you how it's done. Take away the mystery & you'll be just fine.

Granted, not everyone can be a brain surgeon, but there for the longest time folks didn't think they could put gas in their own car either.

But lest we forget, that dollar figure you see for the artist/producer? That's still what he/she figures they deserve/get. There is still the agent's take (min. of 15%) & other BS charges that will come off the top of that figure (if that even gets awarded), so let's not start cheering quite yet.

This message has been edited since its posting. Latest edit was made on 05 Nov 2011 @ 12:44

65.11.2011 14:02

I don't even pay for music or bother with it; the most I get out of it is old fashion radio when driving.

76.11.2011 7:45

Originally posted by LordRuss:
Not to be one for "I told you so", but indeed... I have been telling you folks this for months that this is how these bastards do business.

It is all the more reason why I support the efforts of Radiohead. Self support when you can. Your fans will indeed pay their way. All you have to do is get one (1) honest person to show you how it's done. Take away the mystery & you'll be just fine.

Granted, not everyone can be a brain surgeon, but there for the longest time folks didn't think they could put gas in their own car either.

But lest we forget, that dollar figure you see for the artist/producer? That's still what he/she figures they deserve/get. There is still the agent's take (min. of 15%) & other BS charges that will come off the top of that figure (if that even gets awarded), so let's not start cheering quite yet.
Of course when people sue they do get cheated due to the law regardless of who you are due to the 15% thing but I do find it Ironic it was this very thing in I believe in 99 or 98 the RIAA tried to do this very thing to rip off their artists/producers and the artists rebelled.

The RIAA are the real crooks especially if anybody remembers The RIAA went after a Artist who Pirated his own Music a few years back if anybody remembers.

86.11.2011 11:39

Originally posted by Tristan_2:
The RIAA are the real crooks especially if anybody remembers The RIAA went after a Artist who Pirated his own Music a few years back if anybody remembers.
It goes back even further than that with Bruce Springsteen, Andy Warhol, Jack Kirby... probably even further than that given that legislation wasn't even put on the books. Artists have been fighting their commissioners for some kind of credit for their work since Ogg on the cave walls.

It's like I've redundantly said before, "Everybody loves art, till they have to pay for it. Some asshole will always step up to collect the fee for the artist, but he thinks his talent is always 10K times that of the artist's every time."

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