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Eminem Lawsuit May Result in Higher Royalties for Older Artists

Outcome of suit has determined that digital sales qualify as licenses

March 28, 2011 4:50 PM ET
Eminem Lawsuit May Result in Higher Royalties for Older Artists
Lester Cohen/WireImage

The outcome of a lawsuit on behalf of Eminem against his record label Universal Music Group could radically change the way many artists are paid for digital sales. Eminem's suit argued that at least according to the language in his record contract, individual songs sold online count as a license rather than a sale. This may seem like a minor semantic argument, but according to Eminem's contract – and many others drafted before digital sales were realistic – it is the difference between the artist being paid 50 percent of royalties for a license or 12 percent for a sale.

Photos: Eminem and Jay-Z Launch Home & Home Tour in Detroit

The Supreme Court refused to hear an appeal on this suit last week, meaning that a lower court's decision in favor of Eminem will stand and that there is now major legal precedent stating that digital music should be treated as a license. This decision won't mean much for younger artists with modern deals covering digital sales, but it stands to drastically increase the revenue of older artists with deals drafted before the mid to late Nineties.

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Having to pay older artists more for catalog items may have a dramatic impact on the finances of record labels. Old recordings account for a very large portion of overall sales and require little to no promotional costs, resulting in an easy source of revenue. With less money to gain from older titles, many labels could find themselves with significantly reduced profits.

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