Warner Music Close to Settling With Artists Over Digital Royalties Dispute

Class action lawsuit says talent should be paid much more for downloaded music and ringtones

Warner Music Group Class Action Settlement Royalties Digital
Warner Music Group in Burbank, California Photo by WMG
Chris Martins WRITTEN BY
Chris Martins

Warner Music Group has submitted a settlement offer of $11.5 million in a class action lawsuit filed by its own artists having to do with payment for downloaded music and ringtones. There will now be a hearing on January 23 to determine whether or not the offer is satisfactory. If the deal is accepted, it will merely be a stopgap in the greater issue of how to handle artist payouts for digital audio.

Filed on February 2, 2012 by named plaintiffs Kathy Sledge-Lightfoot of Sister Sledge, "Dream Weaver" writer Gary Wright ("Dream Weaver"), and singer/actress Ronee Blakely, the suit alleged the label improperly paid its roster royalty rates instead of licensing rates for music distributed via digital outlets. Royalty rates are worth 6 to 20 percent, and based on physical sales models. Licensing rates used in film and television are usually around 50 percent.

While the latter hasn't traditionally been used in direct song sales (as opposed to selling a film or broadcasting a show that contains the music), the former is arguably more problematic because it accounts for concerns only relevant to physical product: manufacturing costs, customer returns, and unsold merchandise. If the settlement, which has already been accepted by both sides, gets a judge's signature, no precedent will be set for future rates or rates-related disputes.

"We are pleased to have resolved this matter and believe that this is a fair settlement for all parties," said a Warner spokesman, via Billboard. But the only resolution will be an $11.5 million payout, reduced by $3 million to cover legal fees and expenses, divided by possibly thousands of artists. Applicable members of the WMG roster include anyone signed before January 1, 2002. The payout covers sales that took place between January 1, 2009 and December 31, 2012.

As a condition of the settlement, WMG admits no wrongdoing. Participating artists will be receiving payouts pro-rated to account for their percentage of the money earned by Warner via digital media during the time period (estimated to by $381 million total). Artists who do not take the class action payout will be able to sue on their own over the exact same issue if they choose.

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