A federal appeals court has ruled in favor of Eminem's former production company in a 2009 suit filed against Aftermath Records and Universal Music Group. The original suit, filed in 2004, called for an increased royalty share of the alleged $2.5 million Eminem's digital downloads made between 2003 and 2008.
Friday, the U.S. 9th Circuit Court of Appeals ruled Eminem and F.B.T. Productions were entitled to a 50-50 split with Universal for all recordings licensed to digital distributors such as iTunes. Various sources report UMG previously paid Eminem and F.B.T. a 12 percent royalty rate for music licensed to digital distributors, which is the agreed-upon rate for physical albums.
UPDATE: After the ruling, Universal released the following statement: "We will be filing a petition for a rehearing. In the meantime, it should be noted that this ruling sets no legal precedent as it only concerns the language of one specific recording agreement. Any assertion to the contrary is simply not true."
Ethan Smith, of the Wall Street Journal's "Digits" legal blog, explains the wording of the ruling makes the distinction that even when a customer pays for a song from iTunes or a similar digital distribution service, they are licensing the song, and not purchasing it.
"Even in some cases in which only older recordings of an artist continue to be distributed by a given label, the label and the artist have gone back to hash out the issues surrounding digital downloads," Smith notes.
Further rulings by the court, based on UMG's anticipated petition will determine if the new language in the ruling is just semantics or the beginning of a massive change in how labels and artists do business with iTunes.