This April, parody song genius Weird Al Yankovic and his company Ear Booker Enterprises sued Sony Music Group for failure to pay royalties on Weird Al’s songs that were digitally downloaded. Sony had been treating the downloads as “sales” rather than as “licenses” meaning that the performer gets a smaller share of the download price. Traditionally, music companies have given a lower percentage for record sales due to the cost of physically producing the CD or vinyl album. For well-known artists, 12% of the sale of a CD where they can get as much as 50% of the license fee. Weird Al calculates that this difference means Sony owes him about $2 Million. That’s a lot of “Eat It” downloads!
What’s disturbing about Sony’s position is that in 2010 Eminem sued Universal Music Group over this exact same issue and he won. The court held that digital downloads are “licenses” (as all the download websites declare) and not “sales” of music, awarding Eminem his 50% share. The appellate court upheld the decision and the Supreme Court refused to hear argument on the case – so basically this issue has been resolved. Yet Sony kept applying the sale rate to Al’s downloads and therefore he sued. I suspect that this is heading towards settlement as the case was filed 6 months ago and Sony has not even submitted an answer yet and has asked for repeated extensions of time to do so. A federal judge would normally only grant this much time to answer if Sony and AL indicated they were sitting down and trying to come up with a fair number.
What could be delaying it is that Mr. Yankovic has other claims against Sony – first that they recouped their production costs twice from him; second, that they did not pay him his fair share from their huge settlement with the Holy Trinity of illegal file-sharers Napster, Kazaa and Grokster; and third that Sony’s equity share in YouTube is directly apportionable to Yankovic’s equity share for his content, such as hit song “White & Nerdy.” The suit claims that Yankovic is owed a rather large piece of Sony’s equity stake at $2.5 million. So those issues are thornier to resolve than the license issue.
But this lawsuit should send a strong message to new artists out there about the importance of having competent legal representation when you are sitting down with a record label or distributor. If Weird Al’s allegations are true, the complaint demonstrates that record labels will try and get away with whatever they can to milk every last cent out of a work of art before they pay the artist. If Sony can ignore the Eminem ruling and rake in an extra 38% off an established artist, what will they do to an up and comer who is just happy to sign any piece of paper in front of them so they can say they are a Sony or Universal artist? Key components of any agreement with a label are the right to an audit and an accounting of sales, downloads and recoupment costs. Also artists should closely examine what costs labels are trying to recoup as they should only get back costs directly tied to the production and promotion of the artist’s music and not general overhead items like rent, utilities and equipment depreciation or cost.