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Monday, March 9, 2009

The Suit That Could've Change Everything

Rapper Eminem and record label Universal Music Group (UMG) just completed a battle in court that could've dealt a final death blow the music industry.

Eminem's FBT production company sued UMG over what amounts to the definition of ownership of a digital file. FBT claimed that UMG owed them more money because a digital file sold by iTunes or Amazon MP3 is actually a license. UMG insisted that regardless of whether it's a CD, vinyl record, or digital file, Eminem's music is part of their distribution deal.

So is it licensing or is it distribution? That's what the court had to decide.

There was a lot of money at stake here. If the court decided that selling a digital file is a licensing deal, then the record label and the artist would split the proceeds 50/50 and the artist would be entitled to about 35 cents per download. But if they decided it's distribution, then the original recording agreement would still be in force and the artist would make about 15% (more or less), or about 10 to 20 cents on every download instead.

FTB claimed that, since there's no manufacturing or packaging costs (which are covered by the record label), and only a single copy is delivered to the digital download companies, then it should be a license, since that's what occurs in other licensing deals. UMG argued that a sale is a sale regardless how it happens.

On Saturday, the court sided with UMG and the industry released a giant sigh of relief. You can be sure that the issue isn't dead and will be revisited in the future, however.

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