We have seen a plethora of lawsuits in the past couple of years that involve royalty payouts. Most of these lawsuits involved Spotify, but 2018 brings a new potential trend in mechanical royalty lawsuits in the US and abroad. Many artists have participated in US class action lawsuits, but Enrique Iglesias has filed suit against Universal Music Group as an individual claiming that UMG has been “systematically underpaying royalties.” The ever-looming argument of who is making money at the cost of artist creation is changing as the attention shifts. Last year there was a major focus on the streaming services, but if a contracted individual files a lawsuit against their publisher or label…what does this mean for artist/label relations? Enrique Iglesias filed a lawsuit in Miami on 24th of January due to a lack of general streaming royalty agreement with his label. Iglesias’s contract was completely void of streaming royalties in the initial contract in May of 1999 with Interscope Records and again in 2010 with UMG. As Music Business Worldwide reports, the controversy stems from one line of text in the initial contract that Iglesias’ team states says, “The record contracts state that a 50% royalty would be paid ‘for any type of use not specifically covered [here]’ (MBW, 2018) As the contract was signed into agreement in 1999, music streaming wasn’t yet a considered possibility, let alone one that would be included contractually. Therefore, from an objective perspective, UMG signed up for this lawsuit without a contract revision. If anyone was to make a contactual agreement about streaming in the late 90s, you would expect a split, but in any situation a 50/50 split of an unrealized income stream is a surprise coming from a major label such as UMG. The original contract explicitly agrees to royalties under 50% for other physical and digital formats, but the plainly worded text on future technologies may be a lesson for other labels on contractual arrangements and the need for their renewal. What does this mean for contracts as technology progresses? Is there a way to account for a steady percentage regardless of medium? And ultimately, what will the courts decide in this lawsuit and how will the ruling affect future artist contracts?
To read more: