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Sale or License? Sister Sledge Sues Over iTunes

Hugh Pickens writes (1984118) writes | more than 2 years ago

Businesses 0

Hugh Pickens writes writes "The Hollywood Reprter reports that members of the iconic disco-era musical group Sister Sledge have filed a major class action lawsuit against Warner Music Group claiming that the music giant's method for calculating digital music purchases as "sales" rather than "licenses" has cheated them out of millions of dollars from digital music sales. Songwriters typically make much less money when an album is "sold" than they do when their music is "licensed" (the rationale derives from the costs that used to be associated with the physical production of records) but record labels have taken the position that music sold via such digital stores as iTunes should be counted as "sales" rather than licenses. The difference in revenue can be significant as Sister Sledge claim their record deal promises 25 percent of revenue from licenses but only 5-1/2% to 6-1/2% of net from sales. Eminem's publisher brought a nearly identical claim against Universal Music Group and won an important decision at the 9th Circuit Court of Appeals in 2010 when the 9th Circuit ruled that iTunes' contract unambiguously provided that the music was licensed. The lawsuit argued that record companies’ arrangements with digital retailers resembled a license more than it did a sale of a CD or record because, among other reasons, the labels furnished the seller with a single master recording that it then duplicated for customers. “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,” says attorney Richard S. Busch. “It’s only fair that the artist should receive 50 percent of the receipts.”"

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