Eminem royalty ruling has broader implications for digital media sales
March 27, 2011 | 6:03 pm
I hadn’t been paying much attention to the court ruling issued in the case of white rapper Eminem suing his record labels for more money. But then I saw this piece in Techdirt about it, and had to reconsider. It may not have direct implications for e-books specifically, but it definitely has larger implications for digital media as a whole.
Eminem’s producers sued the Universal subsidiary that was handling his music for a greater share of royalties. The rationale was that music sales generate a much lower rate of royalties than music licenses (for use in TV shows, commercials, etc.)—and since sales of iTunes songs are considered licenses (except whenever it’s most convenient for the record labels to claim they’re “sales”), Eminem felt he should be getting a bigger cut of the pie.
The lower court didn’t agree, but the 9th Circuit appeals court did—awarding Eminem the higher “license” royalty rate for iTunes sales. And the Supreme Court recently refused to hear the case, letting the appeals court ruling stand. The precedent is only binding in the 9th Circuit, meaning that it doesn’t necessarily mean rulings in other circuits will go the same way—and a differing ruling in another circuit is probably the only way SCOTUS will be moved to reexamine the issue.
The implication for the record industry is, of course, now that the test case has gone in favor of the artist it might very well start seeing more of them pop up from, well, every other artist who’s ever sold music through iTunes. If the recording industry thinks it’s in trouble from piracy now, how much worse will it be if the labels suddenly have to disgorge as much as 50% of the proceeds of every iTunes sale they’ve ever made?
The broader implication is that this strengthens the content industry position that electronic sales—including those of e-books—are not sales but “licenses”, meaning that the consumer has considerably less control over the works he “buys”. Another recent 9th Circuit decision holds that licensed physical works such as software disks cannot be resold against the license terms even if they were bought new and unopened.
Of course, the idea that “used” electronic media could ever be “resold” is pretty much a pipe dream anyway; even leaving the content industries hate the used markets for physical goods enough that they’ll never let a virtual one get started no matter what plucky startups think.
It will be interesting to see whether more artists start sticking it to the record labels. It’s almost certain that future recording contracts will address this issue, but given how much music iTunes has sold already, hundreds of millions of dollars could be at stake.