Eminem Lawsuit Could Cost Labels Millions And Mean Higher Artist Royalties

Eminem's publishing company, FBT Productions, is suing Universal Music Group for $1.6 million in unpaid royalties from digital sales. At stake are tens of millions of dollars and the very definition of royalties.

Like all music sales, the royalty rate paid is determined by a contract between labels and artists. But in the majority of recording contracts – particularly those first executed before the debut of iTunes – digital royalty rates are not stated explicitly stated.

Eminem's team believes that downloads should fall under the licensing agreement portion of contracts that cover physical releases like CDs, but his label Universal argues that they are part of the "distribution" portion of the contract which pays a lower rate. Many contracts split licensing royalties 50/50 with the artist but distribution rates paid to artists often run 25-30%.

"If you give the music to a third party without cost to you, like manufacturing or packaging, that's the same as a licensing agreement," a member of Eminem's legal team told The Wrap "(They) are characterizing it as something else."

"Steve Jobs … discussed his company's relationship with UMG as that of a 'license' in an essay titled 'Thoughts on Music' dated February 6, 2007," read the court papers. "Although he consistently referred to Apple 'licensing' music from 'the big four music companies', when deposed in this case he claimed not to know whether his company's relationship with Universal was, in fact, a license."