More UMG Download Suits

The U.S. Supreme Court’s decision not to give Universal leave to appeal a lower court ruling that a download counts as a license rather than a straight sale appears to have opened the way for a raft of lawsuits that could cost the record company millions.

The court awarded Eminem and his producers 50 percent of all revenue from iTunes downloads, which is about three times more than what Universal has been paying them on a straight sale basis.

Artists would normally earn somewhere between 12 percent and 20 percent of the revenues from sales but if a song is licensed they’d receive 50 percent.

What’s worse for the Vivendi-owned business, the world’s largest music company, is that the estate of funk star Rick James had already filed a federal class action against the label, claiming it should also have been paid 50 percent on all sales of digital downloads and ringtones.

Now Rob Zombie, White Zombie, Whitesnake and Dave Mason have filed a class-action suit against Universal in the District Court in San Francisco.

In each case, the artists or their associates say the record company violated their contracts by counting a digital download as a sale instead of a licensing.

The latest class-action accuses Universal of unfair business practices by knowingly miscalculating royalties, claiming the company “analyzed internally the financial consequences of its misconduct and cast it in terms of the additional profit to be made by UMG by avoiding its contractual obligations.”

The sudden increase in the number of suits reveals how a contractual technicality that was of little concern a decade ago has become more significant with the growth of digital music.

Universal released a statement saying the complaints suffer from serious flaws and weaknesses, not the least of which is that the claims asserted are not appropriate for class treatment. It said it would vigorously defend itself.