BY BRIAN McCOLLUM
DETROIT FREE PRESS POP MUSIC WRITER
The Supreme Court has quietly handed a major victory to Eminem in a much-watched case involving online royalties.
In a triumph for the Detroit star and his former production company, the court today declined to hear an appeal filed by Universal Music Group in a dispute over payments for downloaded tracks and ringtones.
The court let stand an appeals-court ruling against the record company — the world’s biggest — and set the stage for a potentially massive payout to the rapper and Ferndale’s F.B.T. Productions.
“For us, this is probably a $40 million to $50 million issue,” said Joel Martin of F.B.T., which filed the lawsuit in 2007. “Every artist who has this sort of language in their contract is now going to go back to their record company and say, ‘OK, so what do you want to do about (download royalties)?’”
F.B.T. administered Eminem’s deal with Universal in 1998, on the cusp of the MP3 revolution, and still has royalty rights in his work. The firm, which includes the well-known brother team Jeff and Mark Bass, has shared the rapper’s recording contract for some of the best-selling releases of the modern era, including albums such as “The Marshall Mathers LP” and last year’s “Recovery.”
Eminem was not a direct party in the suit, and has not publicly commented on it.
The Supreme Court has sent the case back to a trial court to determine damages. If Universal and F.B.T. cannot settle on a figure, a judge or a jury would decide what is owed.
At issue was the royalty rate for tracks distributed via online services such as iTunes. Universal claimed it owed F.B.T. the same royalty it paid for physical sales: 18% of the suggested retail price.
Eminem’s team argued that because Universal’s online agreements are actually licensing situations, not unit sales, a different type of calculation should kick in: 50% of net revenue. The 9th Circuit Court of Appeals agreed in September, reversing an earlier jury decision.
There has been sharp disagreement about the ruling’s broader impact.
Universal and some industry observers have said it will have few ramifications beyond Eminem. Most current hit artists already have contracts that explicitly spell out download royalties, and many other deals have been reworked in recent years.
In a statement today, Universal spokesman Peter Lofrumento said: “The case has always been about one agreement with very unique language. As it has been made clear during this case, the ruling has no bearing on any other recording agreement and does not create any legal precedent.”
But other experts have said the ruling will have profound effects on an industry that has already seen massive upheaval in the past decade. With the Supreme Court’s tacit endorsement in hand, artists with older deals may feel empowered to attain higher payments for download sales.
That might include Motown performers seeking to address their royalty rates with Universal, parent company of Motown Records, guided by the same arguments that worked for Eminem.
“We’ve been waiting for this from the Supreme Court, but we’ve been talking with the artists about it, and they’ve been very interested,” said Billy Wilson of the Motown Alumni Association, which had filed an amicus brief in the case. “And it’s not just Motown artists, but many others in the same situation, who now have the same opportunity to renegotiate their contracts — and renegotiate the structure of the music industry, really.”
Royalities Ruling
