(My apologies for the headline!)

Eminem Wins Appeal Over Universal Music: iTunes Downloads Should Be Accounted Differently Than CD Sales
from the uh-oh-universal dept

Well, well, well. A few years back, we noted that Eminem's publisher was upset about the royalty cut they were getting from sales on iTunes, and they eventually sued both Apple and Universal Music over this (though, I'm still confused why Apple is involved). The issue is a contractual one: as is standard in lots of recording industry deals, musicians make very little money from each album sold. However, when their music is "licensed" for other things -- such as a commercial, movie or video game, they make a much larger percentage. The reasoning, of course, is that there are a lot more "costs" that go into making and selling a CD, which the label is taking on.

But here's where it gets tricky: what is a sale via iTunes? Is that a "sale" like a CD (meaning a small percentage royalty)? Or is it a "license" like for a movie (meaning a much bigger royalty)? Conceptually, you can make a reasonable argument for either side. After all, from the consumers' perspective, it's very much like buying a CD. But... from a technological perspective, it's really a lot more like licensing, since you don't have the same production, physical goods, shipping and distribution costs. A jury originally sided with Universal Music, saying that it's really just like a CD sale, and thus, the lower royalties should apply.

However, the 9th circuit appeals court has just ruled the opposite way, saying that the contract is "unambiguous" that iTunes sales count as a license, for which the higher royalties apply:

(click the link below for the court docs and other links within the article)

This could have a major impact on how much Universal has to pay out to musicians for iTunes sales. Of course, Universal Music is downplaying the ruling, saying that it's unique to Eminem's contract, and that the company plans to fight the ruling. However, Universal Music (and others, potentially) may be in bigger trouble than they care to admit over this ruling. There are other, similar cases underway as well. While I'm sure its more recent contracts are quite specific on this point, for large segments of the back catalog, Universal could be looking at actually having to pay out significantly more in royalties. Of course that assumes they have accurate records somewhere -- which certainly is no given.

http://www.techdirt.com/articles/201009 ... 0898.shtml

So in short, prices are gonna go up.

...but at least artists see more of the money, instead of greedy corporate fat cats.

I would have classed downloads as sales rather than licensed material.

I can support that. The additional costs are minimal though from an accounting perspective you should apportion costs amongst all copies sold. A CD would have higher costs because of manufacture but these would be easy to apportion because they would be physical goods purchases, such as jewel cases and printing and CD mastering and would have been bought in. Cost such as art work would be claimed against both formats in proportion to sales. The fact that all the costs are set against the CD would make it sensible to treat downloads to a license. Though that would also apply to streaming so should get a higher return as well.

Just personally speaking, I wouldn't give a sh1t - I think I'd happily watch the music industry put the final nail in it's coffin if that happened

Yes but what about the artists and those that actually create the music?

Artists or not, they're part of a business, and consequently have to move with the times. In the long run, I could see the death of the 'industry' being very good for them.

It should be better for the customers in the long run too, maybe even a return to singers that don't sound like a ZX Spectrum loading a program...

It will take some adjustment for all concerned. I can see the benefits of the industry giants disappearing.