Last week, a Los Angeles jury ruled against former Eminem producers the Bass Brothers and their company F.B.T. Productions, upholding the music industry’s current model to handling royalties for digital downloads. In the suit, filed in 2007, F.B.T. alleged that Universal Music’s relationship with Apple amounted to licensing songs to the company for use in iTunes, rather than merely working with a distributor—in part, because Apple actually creates the digital files that customers buy from the iTunes store, rather than passing along content directly from Universal. The difference could be significant: the suit sought to have Universal treat songs sent to Apple as digital master copies, which would be subject to a 50 percent royalty rate under the terms of the Bass Brothers’ contract. As it stands, Universal (and other music companies) treat digital downloads at the same royalty rate they treat physical CDs, currently about 12 percent.
The jury agreed with the music industry’s assertion that digital purchases are no different from physical music purchases for purposes of computing royalties. The Bass Brothers also argued the higher royalty rate should be applied to cell phone ringtones.
The case could have had significant implications for the online industry if it has been decided in favor of the Bass Brothers, forcing the music industry to turn over a much higher percentage of their revenue to the artists who actually create and produce music. Of course, this would have likely meant that the music companies would, wherever possible, raise prices for digital downloads in order to protect their own bottom line.
The case was not a total wash for the Bass Brothers; the jury also found that they were entitled to $159,000 in unpaid royalties.
