So does iTunes license or distribute music?March 11, 2009
One of the reasons I’m not a huge fan of iTunes is because of the discrepancy between how they treat music for the purpose of the consumer and the artist. Regular iTunes music is ‘licensed,’ not sold, to consumers – that’s why you can’t play it on unauthorized computers (this doesn’t apply to the DRM-free iTunes Plus). However, from the point of view of the royalties they pay to artists and labels, they are considered to be a distributor – iTunes pays the same royalty rate as Wal-Mart (about 12%), and not the higher royalty rate that is normally paid for music that is licensed from the label.
This discrepancy got put to the test last week, albeit in an indirect way. Mark and Jeff Bass, of F.B.T. Productions, worked on some early Eminem albums, including The Real Slim Shady. Last week, they went to court in Los Angeles, suing Interscope (a division of Universal) for unpaid royalties. Their argument was that iTunes and other digital music services were the equivalent of manufacturers, receiving a digital ‘master’ and making copies for distribution. Rather than the 12% royalty, therefore, the artists should be receiving a royalty of 50% – the basis for the argument that they were underpaid.
Well, the jury didn’t buy it. They sided with Interscope and the argument that digital downloads are the modern equivalent of the 45, and that artists should be compensated at the lower rate.