Universal Music Reaches $11.5 Million Settlement Over Pay for Digital Sales

Universal Music Group agreed this week to pay $11.5 million in penalties over allegations that it had underpaid musicians for digital sales of their music. Filed on Tuesday and awaiting a judge’s approval, the settlement resolves a class-action case against UMG. Plaintiffs in the case number an estimated 7,500 artists, though only a handful of plaintiffs were identified. Public Enemy’s Chuck D, Traffic’s Dave Mason and Whitesnake have been among the most vocal plaintiffs involved. In essence, the claim against UMG claims that digital downloads should be classified as licenses rather than sales. The difference is significant, as artists only take 15 percent of sales, while they get paid 50 percent of sales whenever their music is licensed. Under the terms agreed upon this week, UMG will not have to admit wrongdoing, but will have to pony up the cash nonetheless. The company will increase its royalty payouts to artists moving forward, as well.

UMG’s settlement mirrors similar deals reached between artists and several other major labels. Warner Music and Sony each reached similar agreements in recent weeks, with Warner’s $11.5 million settlement matching UMG’s. In a statement, a spokesman for UMG said the label is happy to put an end to the matter amicably, though it is “confident we appropriately paid royalties on digital downloads and adhered to the terms of contracts.” Of the $11.5 million the label will pay, attorney’s fees and court costs will eat up just over $3 million, while about $200,000 will go to the named plaintiffs. The rest will be divied among artists who had recording deals with UMG or subsidiary Capitol between 1965 and 2004.

While the plaintiffs in the UMG case were pleased with the financial settlement reached, they were perhaps more pleased with UMG’s agreement to bump up royalties in the future. Across the board, UMG is increasing royalty rates by 10 percent. That means that if an artists signed a contract that pays them 15 percent for digital downloads, they will now be getting 16.5 percent. With the matter settled, artists will now likely turn their attention to how they’re compensated for streaming use of their music. At least one lawsuit has already been filed against Sony, challenging how that label accounts for streaming revenue and compensates artists.