Allmans And Cheap Trick File Suit Against Sony That Could Change The Industry
Two veteran rock acts have joined together in a lawsuit that could help many artists receive greater royalties and in the process may radically change a profit structure at established record labels that has been based on catalog sales for decades
In a Class Action lawsuit filed yesterday, The Allman Brothers Band and Cheap Trick allege on behalf of themselves and others that Sony Music is not paying its recording artists 50% of the net licensing revenue received from Apple and other providers of digital downloads as they believe Sony is contractually obligated to do.
Instead of paying its recording artists the approximate 30 cents of the 70 cents it receives for digital downloads after deducting payments to music publishers, the suit alleges that Sony treats each download like a sale of a physical CD only paying on 85% of such "sales" on the theory that there is "breakage of product", deducting a 20% fee for container/packaging charges associated with the digital downloads, and reducing its payments by a further 50% "audiofile" deduction, yielding a payment to the artist of approximately 4 1/2 cents per download. 
According to the complaint, The Allman Brothers and Cheap Trick and other members of this class action have been damaged in the amount of millions of dollars through the loss of royalty payments . "Sony Music is presently engaged in a widespread attempt to underpay its recording artists; with the technological advancements in the music industry, where many people download songs to their iPods and other portable devices, it is essential that artists receive the royalty income to which they are entitled," stated Brian Caplan, one the attorneys for The Allman Brothers Band, Cheap Trick and the class in this action.
The suit which on the surface appears to have merit could mean a devastating loss of income for labels and be a huge windfall for older artists. More than a decade ago when the CD was introduced some artists were able to renegotiate contracts and receive a better deal for CD’s. Label lawyers then reworked contracts to try to cover any and all future ways that music might be manufactured or distributed, but they could not imagine the changes that the digital revolution would bring. New contracts signed within the last 3-5 years treat digital downloads differently and would probably not be effected by this lawsuit.
AL RESOURCES: Press release from the law firm, an LA Times article, and tech viewpoints from WebProNews and MP3.com,
Sony/BMG is dead.
Apple and Microsoft really want them to die. And all Apple has to do is whisper the real number of tracks download.
The big label schmos still think like it’s the 80’s and 90’s, they are the only one who knows the number, they are the only one who control the technology, etc.
They have no idea what hit them. Company like Apple and Microsoft battle intelectual property lawsuits all the time, they know all the dirty tricks. And we are not talking about suing 12 years old to scare the public via mass media. We are talking about statistics and technology secrets.
I hope the big labels die a miserable and boring death (like RCA, Columbia, etc). The sooner the better.
More wishful thinking.
Major labels aren’t going to die. They may end up paying more royalties on digital downloads, but they’re certainly not going to die.
Hey! Wait? You mean there’s no packaging on them download thingies?
It’s about time someone woke up and yelled about this.
How many acts are still stuck taking reduced royalties on the experimental CD format, and higher deductions because of the CD’s more expensive manufacturing process?
I wonder what the return rate is on ringtones?
And what percent of gross is the interest free hold back for breakage and returns?
I’m sure that replacing those broken ring tones has got to be killing the labels. They’ll need better more expensive packaging to combat that.
Major labels aren’t going to die. They may end up paying more royalties on digital downloads, but they’re certainly not going to die.
Posted by: Glenn | Friday, April 28, 2006 at 10:52 AM
The big labels will die.
RCA, Columbia are all radio/gramaphone era gigantic thought to be invincible that couldn’t make it during CD transition. BMG, Sony are the obvious one who can’t make it in digital era.
1. They don’t have the technology to compete
2. people don’t like them
3. They pick wrong enemies (Microsoft, Apple)
4. Their upper management is incredibally thick.
5. more importantly, they don’t have the next generation artist. They are too busy doing ‘Prince’ rehash or American idol. Lucrative at the moment yes, but nobody else care.
6. and … I won’t even mention hilarious business tactic similar to shooting themselve in the foot for short term profit.