Enrique Iglesias Sues Universal Music Over Streaming Royalties

The Latin superstar alleges he's getting a small fraction of the 50 percent royalty rate he believes is dictated by contract. Expect more lawsuits on this front.
Universal

Enrique Iglesias is now in court with the allegation that Universal Music isn't paying the rightful royalty rate with regard to streaming. On Wednesday, the Latin musical superstar filed a breach-of-contract complaint in Florida federal court that alleges he's been shortchanged millions of dollars.

The lawsuit against Universal comes on the heels of a settlement in a different case — one between the company that manages the financial interests of American Idol stars and Sony Music. That case was the first to explore whether a major record label was properly treating streaming income from digital outlets including Spotify, Google and Apple in accounting statements to recording artists. Iglesias' new lawsuit is a signal that this issue isn't going away, especially as streaming becomes the dominant form of distribution in the record business.

"Universal has been systematically underpaying Iglesias’ streaming royalties by calculating those royalties at a small fraction of the contractually-required fifty percent (50%) royalty rate," states the new complaint. "Universal’s inaccurate financial statements characterize Iglesias’ account as being un-recouped millions of dollars even though Iglesias has generated sales of a magnitude rarely attained in the music industry."

Iglesias had 27 chart-toppers under his Universal contract, according to the complaint, and has sold over 100 million albums and generated billions of streams. Yet the recording superstar asserts he's not enjoying the fair share of rewards from his success on streaming platforms because Universal pays the lower rate that is prescribed to the sale of physical records.

That's not allowed, alleges Iglesias.

Iglesias is represented by attorney James Sammataro, who makes the point that streaming shouldn't be treated the same way as physical sales because they don't incur the same sort of attendant costs.

The dispute will first turn on an interpretation of the deal that Iglesias signed with Universal in 1999. The contract states that "if Universal sells or licenses third-parties to sell Records via telephone, satellite, cable or other direct transmission to the consumer over wire or through the air (e.g., downloading), the royalty rate will be the otherwise applicable royalty rate outlined on paragraph 1.01.”

As the complaint acknowledges, that means that downloads are paid at the same rate as physical sales.

But the complaint then notes that the provision "did not prescribe a specific royalty percentage for the 'streaming' of Iglesias’ works, despite the 1999 Agreements’ explicit recognition of this method of distribution."

So in Iglesias' view, this means that streaming should be treated under a separate licensing or leasing provision that requires Universal pay him 50 percent of net receipts.

Iglesias first objected to Universal in March 2017, with a demand for an accounting. According to the complaint, Universal refused to afford him access to its books and records as required by the contract.

An interesting footnote in the complaint states, "Up until approximately 2016, Interscope properly recognized and credited Iglesias’ streaming royalties at fifty percent. However, upon receiving a directive from Universal, Interscope — without consulting or otherwise notifying Iglesias — began crediting streams at the incorrect, lower Record royalty rate. Years earlier, Universal made a similar decision to pay a reduced royalty for digital downloads, and that decision prompted a series of lawsuits and an $11.5 million dollar class action settlement."

In other words, get ready for more lawsuits from recording artists over streaming royalties. Here's the full complaint.

Universal has yet to comment.