Music Industry Shake-Up
As if the music industry hasn't changed substantially over the last 5-10 years, more changes could be on the horizon. With major increases in online and virtual sales, contracting and record deals are taking a whole new shape.
Famed rapper Eminen and his production team are at the forefront of this change. A San Francisco Federal Appeals Court recently ruled in their favor against record label, Universal Music Group. UMG was ordered to pay F.B.T., the team which helped start Em's career, a larger portion for online downloads and ringtones, than for music purchased in stores. This ruling is not only a sign of the times, but could be precedent for a change in the industry from here on out.
"As a practical matter, this case means every single music lawyer is going to be taking a close look at their clients' contracts to see if there's comparable language as a basis for a similar type of lawsuit," said Kelly Frey, a partner with Baker Donelson, who practices entertainment law in Nashville.
When the original contract was signed, the music industry still had heavy sales in physical stores, and ringtones were hardly as prevalent. Today, contracts are carefully drafted to account for online sales, and the technological innovation quickly changing the industry everyday.
This case also shows the difference in music sales v. music licensing. A sale creates a change in ownership, whereas a license creates an authorization to use. The ruling by the appeals court in San Francisco defined the transaction between the record label and an online store as a license not a record sale.
Looks like Eminem is blazing on the charts and in the courtroom!