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.

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.

At issue here is whether the sale of digital music downloads falls under the “distribution” agreements that cover physical releases like CDs. FBT says they do not, arguing that the label incurs none of the costs typically associated with them–things like CD jewel cases and inserts and in-store displays. Instead, the production company says that downloads should be covered by “licensing” agreements that do not 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. “If you give the music to a third party without cost to you, like manufacturing or packaging, that’s the same as a licensing agreement,” a source close to the case told The Wrap. “[Universal] are characterising it as something else.”

Universal, of course, disagrees. It claims the sale of a digital download is no different from the sale of a CD. But it seems to be having a tough time supporting that argument in court. To wit, this exchange between FBT attorney Richard S. Busch and Lawrence Kenswil, the former head of UMG’s e-commerce arm, eLabs.

Busch: “Universal provided two digital files to the download companies–a master recording and a metadata guide setting forth a procedure for getting the music on their system. With the digital download agreements–Universal has no manufacturing costs connected with that, correct?”

Kenswil: “Generally, that’s true. But it has costs. You don’t call them manufacturing costs the way that term has been used traditionally. Manufacturing costs are for physical costs, and that has gone away.”

At issue here is whether the sale of digital music downloads falls under the “distribution” agreements that cover physical releases like CDs. FBT says they do not, arguing that the label incurs none of the costs typically associated with them–things like CD jewel cases and inserts and in-store displays. Instead, the production company says that downloads should be covered by “licensing” agreements that do not 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. “If you give the music to a third party without cost to you, like manufacturing or packaging, that’s the same as a licensing agreement,” a source close to the case told The Wrap. “[Universal] are characterising it as something else.”

Universal, of course, disagrees. It claims the sale of a digital download is no different from the sale of a CD. But it seems to be having a tough time supporting that argument in court. To wit, this exchange between FBT attorney Richard S. Busch and Lawrence Kenswil, the former head of UMG’s e-commerce arm, eLabs.

Busch: “Universal provided two digital files to the download companies–a master recording and a metadata guide setting forth a procedure for getting the music on their system. With the digital download agreements–Universal has no manufacturing costs connected with that, correct?”

Kenswil: “Generally, that’s true. But it has costs. You don’t call them manufacturing costs the way that term has been used traditionally. Manufacturing costs are for physical costs, and that has gone away.”