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Sale Or License? Sister Sledge Sues Over ITunes
Hugh Pickens writes "The Hollywood Reporter reports that members of the iconic disco-era musical group Sister Sledge have filed a major class action lawsuit against Warner Music Group claiming that the music giant's method for calculating digital music purchases as 'sales' rather than 'licenses' has cheated them out of millions of dollars from digital music sales. Songwriters typically make much less money when an album is 'sold' than they do when their music is 'licensed' (the rationale derives from the costs that used to be associated with the physical production of records) but record labels have taken the position that music sold via such digital stores as iTunes should be counted as 'sales' rather than licenses. The difference in revenue can be significant as Sister Sledge claim their record deal promises 25 percent of revenue from licenses but only 5-1/2% to 6-1/2% of net from sales. Eminem's publisher brought a nearly identical claim against Universal Music Group and won an important decision at the 9th Circuit Court of Appeals in 2010 when the 9th Circuit ruled that iTunes' contract unambiguously provided that the music was licensed. The lawsuit argued that record companies' arrangements with digital retailers resembled a license more than it did a sale of a CD or record because, among other reasons, the labels furnished the seller with a single master recording that it then duplicated for customers. 'Unlike physical sales, where the record company manufactures each disc and has incremental costs, when they license to iTunes, all they do is turn over one master,' says attorney Richard S. Busch. 'It's only fair that the artist should receive 50 percent of the receipts.'"
So, RIAA on one hand pays its artists as if it sells its digital files like CDs, but files legal papers claiming that these files are licensed, not sold (so that the doctrine of first sale will not enable reselling the music).
How typical.
If it were Metallica or U2 this legal brawl would be interesting to follow, as both bands have a pile of cash and an army of lawyers ready to take on one of the big record labels, maybe even set a precedent.
Whatever money these sisters have left over from their drug abuse won't even tickle Warner.
Not a surprise considering that they are still charging artists for record-era "breakage" fees not only on CDs but on MP3s. Somehow, they figure that 10% of MP3s "break" and thus shouldn't count towards royalties. They love playing the "We're supporting the artists" line publicly while doing all they can to screw the artists behind the scenes.
My sci-fi novel, Ghost Thief, is now available from Amazon.com.
I've heard similar reports about the labels taking their cut for loss and breakage on digital sales. The artists are getting screwed over. The contract probably doesn't say anything about digital sales at all. Only about physical sales, and licensing. Since digital sales doesn't clearly fall into any one of those categories, one would think that a whole new contract would have to be drawn up to even sell the MP3/AAC version of the song.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
Actually it is both I think.
The music is licensed to Apple for sale to Apple's customer(s) via iTunes.
IMO for the Sister Sledge's purposes the music is licensed since Apple is who pays Warner Music Group.
The RIAA members intentionally create a "limited number of slots available." This artificial scarcity alters the market dynamic, very much so in the favor of the RIAA. Don't think this is an accident. It's fundamental to their business model. An open market is the last thing they want.
Hardly obsolete - perhaps less relevant. RIAA has many, many faults, but internet has not magically removed the need for middle-man and promotion.
Just because you can distribute your music world-wide does not replace the need to market yourself and achieve the initial recognition. That is still expensive to do, perhaps more so nowdays. All of the self-published successes tend to come from bands that were first made famous by the very same RIAA. Just saying...
when labels argued that there was no right of resale for customers.
This lawsuit appears to be discussing the transaction between the record labels and the retailers -- the transaction with which the artist has some concern. The transaction between the retailer and the retail customer is none of Sister Sledge's concern, and a federal district judge has just denied a request to shutter ReDigi on the basis that MP3's may well be traditional property. It is very possible (I would even say almost certain) that the former transaction is a license and the latter transaction is a sale.
The reason the transaction between the label and the retailers appears to be a license is because the retailer gets a single master and license to duplicate for retail sale. Hence the labels do not incur, and should not be retaining, the cost of reproducing the "records".
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The label/retailer distinction is important, and it looks like the labels are wrong on both sides.
They claim that they are selling copies to the retailer, and the retailer is then licensing them to the consumer. That seems like an untenable position. Clearly, if they are selling to the retailer, the retailer must be passing the item "sold" to the consumer.
However, the reverse situation seems far more logical. They are giving a license to the retailer to make as many copies as needed. Each copy is then sold to the consumer.
If they win against the artists, I don't see how they could possibly win ReDigi. But if they lose to the artists, there's a chance that they could still lose to ReDigi.
-- Don't Tase me, bro!
If an artist asks people down loading songs from their website to pay $1.00 and only 7% of the people pay, they make more than if they were in bed with a label.
Having to work for a living is the root of all evil.
From a legal standpoint, it is almost certainly the case that the labels license iTunes to reproduce and distribute, and iTunes sells copies to retail customers. Trying to claim that something else is the case would require a judge with a very pliable sense of reality.
Sweet. I like the way you think, because I am short on cash and thought I would resell my iTunes purchased music that I don't listen to anymore to a friend of mine to raise some extra cash. First-sale doctrine being what it is, I bet I could get him to pay me a quarter a song to transfer ownership to him.
Wait... what?
Wait, didn't the devil lose his fiddle when he went down to Georgia?
All I'm saying is that somebody beat him at his own game.
Seriously speaking though, the record labels have supposedly done two things in the past: they have filtered out bad artists, and they have provided the large amount of capital for bands that is necessary to record studio albums, physically create the vinyl, tape, or compact disks, and go on tour to promote all of their work.
Now, have they really filtered out bad artists very well? Not at all! Britney Spears, every single boy band, Cristina Aguilera, Hillary Duff, Lindsey Lohan, etc. have all been terrible artists that were somewhat commercially successful because they had the industry connections to get some investors. That means though that instead of promoting talented artists who have honed their skills to perfection, the recording industry has actually made it more difficult for those people to get discovered and record deals. It took Britain's Got Talent for Susan Boyle to be recognized - and she was lucky to get on the show to begin with because she isn't a busty young selfish princess that people like to see, and she still had to overcome Simon's own cinematic prejudices against her the first two times she sang! So, promoting talented and practiced artists who "deserve" (read: would generate a good fanbase and make enough money to pay the bills, but not necessarily be a multi-million dollar commercial success) is not actually who the recording industry helps the most - the recording industry already helps those who have achieved fame somewhere else.
Recording albums nowadays is cheaper and easier than it has ever been in the past, primarily thanks to computers and advances in technology for soundproofing and instruments. Anybody can setup a home recording studio in their basement (or their mom's basement) for a few hundred dollars, and for a few hundred dollars more can get any number of instruments that will work for recording an album (they don't have to look nice or be ridiculously expensive). So, for about $2000, one person can record their own album using all their own equipment. Presuming the local economy is decent, anybody can get a menial job and save $2000 over the course of a year if they really want to. Will their recording be professionally mastered? No. Do you think that with the loudness wars and normal people's hearing/appreciation for music that people will notice? Probably not. And even if they do notice they probably won't care about the quality of the recording if the content is good, and if they do care you can spin it off as artistic and if they don't like it they can wait for a better quality recording to become a fan. So, this large expense has been mitigated so much by the current recording industry to be as cheap and easy as possible that normal people can do it without their help anymore, so they have stopped fulfilling that niche.
Finally, bands going on tour like to have some advance in the form of ticket sales from people in a geographic area, so they can judge whether or not it is worth it for them to play somewhere or not. I'm sure the recording industry does some market research regarding this, and that is useful still. But, with the rise of Kickstarter, bands could actually propose to come places and have fans sign up to pay for tickets to that show. But here's the thing - the fans would only pay if the band decided to come out, and the band would be able to decide for themselves whether performing in an area would be worth it to them or not. Kickstarter not only makes it easier for fans to put up advance money without the risk of the band deciding not to come and trying to get their money back from Ticketmaster, and it makes it easier on bands because it crowdsources market research and guarantees them money, and it lets bands scale to the geographical area that would be worth it to them. Bands could even promise "free" swag for people who pledge more an a certain amount (say, $50 instead of just $20 f