Back in 2009, Eminem and his FTB Productions launched a $1.3 million lawsuit against Universal Music Group (UMG) that we warned could have massive financial implications on the entire music industry. Slim Shady contested that when his music was sold on iTunes, this fell under the umbrella of licensing and did not constitute a regular sale. This meant that all digital profits should be split 50/50, rather than the artist being given a standard sales royalty (around 12 to 15 percent). Eminem initially lost the suit, but won a subsequent appeal.
Just as we thought, we're now seeing the ramifications from this case. The estate of deceased funkster Rick James is suing UMG, citing the FTB case as precedent for why it should treat digital music sales as a licensing agreement. To make matters worse for Universal, James's estate filed it as a class action lawsuit, meaning that other artists with similar claims could get on board.
The label has claimed that the previous FTB case has no bearing on its digital sales agreements with other artists. Still that isn't stopping James's estate from claiming that the FTB case means that Universal now owes money based on that previous lawsuit's outcome. Courthouse News Service reveals that the new complaint states, "[UMG] has systematically violated its contractual obligations to plaintiff and other members of the class."
Given the already shaky state of major labels these days, this lawsuit could destabilize the music industry even further. As Billboard points out, most modern music contracts clearly state how digital sales will be split. Artists who signed contracts before the rise of iTunes, however, will doubtlessly be keeping a close eye on this Rick James lawsuit.