A Federal Court in California has ruled in favor of Eminem, by stating that digital downloads from iTunes.com do not qualify as purchases, but are rather “licensed” by the “buyer”. The import of this decision is that there is a dramatic difference between record sale royalties and license agreement royalties.
A recording contract generally pays royalties between 7% and 20% to an artist, depending on their popularity and ability to generate sales, for each album and/or single sold. The same recording contract might allow for 50% of royalties for the licensing of a song, such as to a TV show, commercial, or movie.
As a result of this ruling, artists such as Eminem, will now receive the much higher licensing royalty percentage than the lower record sales royalty. It could mean hundreds of thousands of dollars for artists as popular as Eminem. Even for much smaller artists this is a major decision since iTunes is becoming the leader in music sales while CDs begin to disappear.
Rest assured, however, that record label attorneys are running to their keyboard to make appropriate amendments and soon recording contracts will have a special “licensing” provision for iTunes which brings the royalty down to the intended amount of royalty for record sales. Nevertheless, this decision is a boon to recording artists currently working on a contract who have no such provision.
If you are an artist or band who has been offered a recording contract it is imperative that you first let an attorney review the contract. It is also important to hire an attorney who is up to date on the ever changing law of the music industry.
In some cases, my services may be available on a contingency fee basis which means that you will owe me nothing until the contract is signed.