Wednesday, March 14, 2012
Lawyers Are Getting One-Third of Sony's $8 Million Legacy Artist Settlement...In fact, they may be the only real winners in this class action settlement! A brief history: earlier this month, Sony Music Entertainment agreed to pay its legacy artists $7.95 million to settle a number of digital royalty disputes. Specifically, these older artists ― led by the Youngbloods and Shropshire (of "Grandma Got Run Over by a Raindeer" fame) ― have been arguing that digital downloads should be classified as licenses instead of sales, a change that modifies the payout from a few cents per download to 50 percent.
But unlike previously thought, the Allman Brothers and Cheap Trick already settled their cases, leaving this settlement for 'everyone else'. "The notice of settlement will be sent out to all Sony and Arista artists," music industry attorney Steve Gordon told Digital Music News. "They then can opt to join the settlement if they qualify, or opt out if they want to pursue a separate action."And it's really not that juicy of a payout. Here's a complete breakdown of the settlement - and what it means for artists, Sony, and the lawyers - by Gordon.
"While this sounds like a lot of money, it's probably not a great deal for artists..."
First, some background.
The settlement comes a year after rapper Eminem won a court case that concluded that music downloads from iTunes are licenses, not sales. The distinction is crucial because, in the case of licenses, labels have to give artists 50 percent of revenues and not the 10-20 percent rate artists receive from record sales.
"The decision in the Eminem case has inspired a slew of lawsuits by iconic artists seeking similar results. However, Eminem was not the first to bring suit..."
Previously, the Allman Brothers and Cheap Trick filed suit against Sony on the same grounds but their claims settled (and the settlements are confidential). In fact, it's also worth noting that most superstar artists used their leverage to increase their percentage of income or get big advances against digital sales years ago!
"So here's the breakdown..."
Sony pays a total of $7.95 million to settle the case, if the court approves everything. However, the plaintiffs' attorneys will take $2.65 million of that off the top (or one-third), leaving $5.3 million for the artists.
Of that $5.3 million, $5 million is reserved for artists who sold at least 28,500 total downloads on iTunes between the inception of iTunes on January 9, 2001 and December 31, 2010 including current class members Youngbloods and Shropshire. Qualifying members would split that $5.3 million pro rata to the number of downloads of their records. However, these two artists may ultimately receive a lot less than splitting the $5 million between themselves because any artist who was signed to Epic, Columbia or Arista Records who sold more than 28,500 is eligible to join the class if they entered into agreements dated between January 1, 1976 and December 31, 2001. According to a trusted source there may well be over 100 artists would qualify for membership. The balance of the money, only $300,000, is reserved for all Sony artists with fewer than 28,500 total downloads on iTunes.
The proposed settlement also provides for a prospective 3% bump in artists' royalty rates with respect to permanent digital downloads and ringtones sold in the US after January 1, 2011. The 3 percent is against Sony Music Entertainment?s gross receipts. This amounts to 3% of 70 cents (the amount Sony received for 99 cent downloads) and that is only 2.1 cents.
"Which means Sony and the lawyers the big winners..."
The beauty of this is that Sony now has an efficient means of avoiding additional suits. If the judge approves the deal, it will be legally binding on Sony artists who qualify as class members, who must either file a claim or expressly opt out. And artists who may otherwise have brought suit may be tempted to take a sure thing and avoid legal fees.
Oh, and if artists have a "red balance" (that is, still owe the record company for unrecouped advances, recording costs, indie marketing and video costs), they will not receive cash. Instead their accounts will be "credited."Which brings us to the lawyers: Digital Music News cooked up this headline, but it must be said in the lawyers' defense their share of 2.6 million will come out to significantly less than their hourly rate. Initially there were four firms working on behalf of the plaintiffs and more than one lawyer at each form worked on the case.
Steve Gordon, Attorney.