Warner Seeks Settlement with Artists over Digital Royalties

Plaintiffs’ class action counsel filed papers on Tuesday asking Judge Seeborg of the Northern District of California to approve the settlement of the class of recording artists to whom Warner allegedly underpaid royalties for digital download sales by applying the ‘sales’ rate structure instead of the more artist-friendly ‘license’ rates, relying on F.B.T. Prods., LLC v. Aftermath Records, 621 F.3d 958 (9th Cir. 2010), in which the 9th Circuit concluded that Eminem was entitled to a 50% royalty for digital downloads under the ‘license’ language in his recording contract.

The settlement comprises a retrospective (limited to the statute of limitations on copyright claims of 3 years) and prospective aspects.

Retrospectively, artists will receive their pro-rata share of a fund Warner will establish $11.5mm (less the $2.8mm the lawyers will take home) based on that artist’s percentage of revenue generated by Warner by digital downloads, which the parties stipulated is $381,510,000.  So the artists are getting their prorata share of about 3% of the revenue Warner generated from downloads.  I’d call that a win for Warner.

Prospectively, class members that file the appropriate paperwork will receive up to a 5% bump in royalty rate, however, no artist will see her royalty rate exceed a ‘Royalty Cap’ of 14% nor see her royalty rate fall below the Royalty Floor of 10%.  Given that Eminem got 50% from Universal under the F.B.T. case, I’d call this another like a win for Warner.

The motion for approval of settlement can be found here.