That Tiny Sum? It's Your Digital Download Royalties After Packaging and Breakage Costs.
A song purchased from Apple’s (AAPL) iTunes or Amazon (AMZN) is no different from one bought from a brick-and-mortar retail outlet, despite the vast differences in the economies of distribution between the two. That, in a nutshell, was the jury verdict handed down in a case brought by rapper Eminem’s former production company, FBT Productions, against Universal Music Group.
At issue here was whether the sale of digital music downloads falls under the “distribution” agreements that cover physical releases like CDs. FBT argued they do not, claiming that the label incurs none of the costs typically associated with them–things like CD jewel cases and inserts, breakage fees and in-store displays. Instead, the production company said that downloads should be covered by “licensing” agreements that don’t include such expenses. And the difference between the two is significant: Under distribution deals, artists typically take a 30 percent split of royalties earned. Under licensing deals, they take 50 percent.
But the jury didn’t quite see things FBT’s way and instead bought Universal’s argument that the economics for digital downloads should be viewed as similar to those of the single. A nasty blow to FBT and other artists hoping to see their royalty rates adjusted to account for the new economies of distribution provided by digital music storefronts. Seems that much as technology has changed the relationship between musicians and their fans, it’s done little to change the one between musicians and their labels.