ITunes Songs Aren’t Purchased but "Licensed," Court Rules

In a decision that could affect the financial relationships between record labels and performers, a federal appeals court in San Francisco on Friday ruled that songs downloaded from Apple’s iTunes store are not actually purchased, but are rather “licensed” by the ostensible buyer.

The distinction is hardly academic. Under most recording contracts, artists are entitled to 50% of revenue from licensed uses of their music. That usually means soundtracks for movies, TV shows and ads. Sales, on the other hand generate royalties for the artist at a much lower rate–generally in the low teens, and rarely more than 20%.

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