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.