4:15pm PT by Eriq Gardner
Counting Crows Latest to Go to Court Over Digital Royalties (Exclusive)
On Tuesday, the Counting Crows filed a lawsuit against Universal Music Group, becoming the latest musicians to allege they've been cheated out of digital income.
The California band believes that UMG should be treating downloads of hits like "Mr. Jones" and "Round Here" off of venues such as iTunes as licensing rather than sales. The royalty difference is significant: a 50 percent share for the first compared to what's traditionally been about 15 percent for the latter.
According to a complaint filed in LA Superior Court, "Through this lawsuit, Counting Crows seeks to compel Defendant to account to and pay the rightful share of licensing income paid to Defendant for downloads and ringtones of the recorded music licensed by Defendant to these entities."
Others have sued over this same issue, including Kenny Rogers, Chuck D, Rob Zombie, Rick James, Sister Sledge, Peter Frampton, George Clinton and more. Most have been emboldened by a 2010 decision at the 9th Circuit Court of Appeals which suggested in a case involving Eminem music that digital downloads should be treated as licenses. Not coincidentally, the Counting Crows are represented by Richard Busch and Paul Duvall at King & Ballow, involved in many of these legal battles including the dispute between Eminem's production team and Universal Music Group.
The litigation campaign has yielded quite a few settlements. For example, Warner Music Group recently submitted a $11.5 million settlement to resolve a class action lawsuit over digital royalties. Another case wrapped up in recent days was singer Michael McDonald, who settled his lawsuit with Warner Bros. Records.
Other companies have taken a harder line. For example, a dispute between Toto and Sony Music has been nearing summary judgment motions and a potential trial. A big class action in California against UMG is also pending as well.
The Counting Crows aren't merely targeting digital income, but other ways that UMG has allegedly underpaid them. A royalty examiner who audited UMG's financial books turned up more than $1 million in alleged underpayments. They include calculations on free goods, tax payments and advertising charges. There's also $183,625 for public performance income.
Still, the biggest claim pertains to digital download money, and the plaintiff says that major record labels know full well they should be treating these as licenses. One of the pieces of evidence cited is a March 2004 letter sent by 27 attorneys in the music industry to UMG president Zach Horowitz.
Instead, according to the complaint, UMG "tried to camouflage the agreements [with third-party vendors] as sales agreements when such agreements were drafted. They did so for one reason: so they could fraudulently represent the agreements to be sale agreements and maintain a greater profit for themselves."
UMG declined comment.