If his suit is successful, which seems likely based on recent precedents, it could result in UMG facing a huge new royalty burden to pay numerous artists who signed standard recording contracts in the days before iTunes. But it could end up having an even bigger impact on another label.
EMI, the smallest of the big four labels, is currently owned by Citigroup. They took over the struggling company when previous owner, Terra Firma, defaulted on loan payments.
Citigroup has no interest in owning a record label, and is looking for a buyer. But with the threat of a huge royalty liability hanging over the company, that would become more difficult.
Digital Music News has spoken to people involved in negotiations to buy EMI, and they believe potential buyers will demand protection against that possibility. One source told them, "This could be accomplished through mechanisms like graduated payments, it could be done through clawbacks or sunsetting."
In other words, any buyer will likely insist Citigroup return some of their money if EMI suddenly finds itself having to pay adjusted royalties for years of music downloads.
Of course, even these payments may pale in comparison to what is expected on the horizon. US Copyrights for recordings made prior to 1976 will soon be subject to termination, a right created by the Copyright Act of 1976.
Labels will soon have to decide whether to offer artists and their heirs big settlements or lose control over huge swaths of their catalogs. The way things are headed, record labels may have to start relying on actually recording music instead of selling the same old work over and over in one new format after another.
Or maybe they will simply be forced to accept their new place as just service providers for musicians instead of the center of the music world.
Written by: Rich Fiscus @ 7 Nov 2011 16:49
