After the Supreme Court rejected a reconsideration of an appellate decision that raised legal questions about the digital royalties owed to recording artists of yore, the estate of the funk performer Rick James potentially has opened what many analysts had predicted might be a litigation flood, filing its suit against giant Universal Music Group over its payments for digital downloads and ringtones. Since the James complaint was filed as a federal class action, any musical artist with related claims might join in and take part in any potential recovery.
Just who might be a party in the action, of course, will be determined by the courts, starting with the U.S. District Court in San Francisco, where the James action was filed. That court must consider and approve the class status and determine how it will be defined. Universal has said this current round of digital royalty disputes affects its dealings with only one artist: Marshall Mathers, aka Eminem, who, with F.B.T. Productions (which discovered him) prevailed recently in litigation with Universal over digital royalties in a case decided by the U.S. Ninth Circuit Court of Appeals and left undisturbed by the Supreme Court.
The economic stakes in this litigation could be huge, with a prominent music entrepreneur based at a well-known music school estimating for the Future of Music group that the disputed and unpaid royalties could amount to more than $2 billion just in iTunes licensing. The legal disputes, of course, chiefly affect seasoned artists, such as Rick James, whose record contracts predate the era of digital music sales. Recording companies had paid these artists royalties for digital downloads and ringtones as a small percentage of sales; the artists say they’re entitled to as much as half of licensing revenue. Why? Artists see the industry no longer needing to produce and manufacture millions of physical recordings (CDs) and to send them around the world; instead, firms like Apple, via iTunes, can get a license and a single master to a song or album and make it available to millions for huge sums.
The dispute has roiled the industry before and there are other lawsuits pending, also involving name acts and big firms.