Universal Music Settles Digital Royalties Class Action For $11.5 Million
For the past few years, musical artists have been complaining about being paid low royalty rates. This just changed for Universal Music acts. The record company has agree to pay $11.5 million to settle a class action lawsuit over digital royalties. And under the settlement, UMG artists will also get a higher royalty rate.
Several recording artists had claimed that the company cheated them by improperly classifying digital downloads off of services like Apple’s iTunes as “sales” instead of “licenses,” according to the lawsuit. The amount is significant. Under “licenses” or “leases,” artists receive half while under “sales,” artists only get about 15 percent of net receipts.
While the settlement still needs to be approved by the judge, it would compensate an estimated 7,500 artists including named plaintiffs Chuck D. of Public Enemy, Rick James (by way of trust), Dave Mason of Traffic, Whitesnake, Andres Titus of Black Sheep, Ron Tyson of The Temptations, Martha Davis of the Motels, Feliciano Tavares, among others.
However, under the settlement Universal does not not have to admit wrongdoing. In a statement, UMG said, “Although we are confident we appropriately paid royalties on digital downloads and adhered to the terms of contracts, we are pleased to amicably resolve this matter and avoid continued legal costs.”
Of the $11.5 million settlement, a little more than $3 million will pay for attorney’s fees and costs and about $200,000 is going to the named plaintiffs. “The rest will be going to artists with contracts from UMG or Capitol Records between 1965 and 2004 with certain caveats,” says The Hollywood Reporter.
Universal will increase its royalty rate by 10 percent; artists who previously got 15 percent of net receipts would now get an additional 1.5 percent, or 16.5 percent total.
Len Simon, one of the lead plaintiffs’ attorneys, said, “This settlement is a fair resolution of this controversy over how to compensate artists for their valuable work in a new medium which we believe was not contemplated by their contracts, many drafted in the 1970s or 1980s. And it compensates these artists now, rather than after additional years of litigation and uncertainty.”
Warner Music and Sony have settled similar class action lawsuits.