Thursday, June 02, 2005

Legal action concerning revenues digtal downloads

According to a story by press agency Reuters, Third Story Music, a Los Angeles-based music publishing firm and the successor to the production company that managed singer-songwriter Tom Waits early in his career, has filed a federal suit against Warner Music Group, alleging that Waits has been shortchanged on the sale of digital downloads.

The action, filed in U.S. District Court for the Central District of California in Los Angeles on Tuesday, stems from 1972 and 1977 contracts signed by Third Story principal Herb Cohen and Warner-owned Asylum Records regarding Waits' services.

The Waits recordings at issue include such early albums as "Closing Time," "The Heart of Saturday Night," "Small Change" and "Heartattack and Vine."

According to the suit, under the terms of the two contracts, Waits was entitled to royalties of either 25% or 50% from revenues derived from third-party licenses. Third Story maintains that digital music downloads constitute a form of third-party license, and that Waits is entitled to payment at that level.

In 2003-04 royalty statements to Third Story, WMG computed royalties from Waits' digital download sales at the same (and much lower) rate as royalties from the sale of physical product. Under the terms of the '70s Asylum contracts regarding album sales, Waits would be entitled to either 9% or 13% of the 67 cents received by WMG from each 99-cent download.

The action says that in February, Third Story sent a formal notice questioning the accuracy of royalty statements to WMG. The music company replied in March that downloads "are sold to customers such as iTunes and just as physical product is sold to...Best Buy and Virgin."

Third Story seeks a declaration that compensation for downloads is governed by the third-party license provisions of the Asylum agreements, and damages in an amount to be determined.

A spokeswoman for WMG, which recently went public about a year after being sold to a private investor group by Time Warner Inc., said the company had no comment.

(source: Reuters/Hollywood Reporter)

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