Apple iTunes may open new age of music distribution. However, new model always arises new issue. Last September, the Ninth Circuit made its decision regarding the dispute of loyalty between performers and record labels (F.B.T. v. Aftermath Records). The Ninth Circuit decided that songs downloaded from Apple’s iTunes store are licensed, not sold.
F.B.T. signed Eminem in 1995, and transferred Eminem’s exclusive recording services to Aftermath. Under the agreement between F.B.T. and Aftermath, the “Records Sold” provision provides that F.B.T. is entitled to receive between 12% and 20% of the adjusted retail price. In addition, F.B.T. is entitled to receive 50% of Aftermath’s net receipts on masters licensed to others for their manufacture and sale of records or for any other uses.
In a 2006 audit, F.B.T. found that "Aftermath had been applying the Records Sold provision to calculate the royalties due to F.B.T. for sales of Eminem’s
recordings in the form of permanent downloads and mastertones." F.B.T. brought a lawsuit in the district court, and the jury's decision is in favor of Aftermath. F.B.T appeal and the Ninth Circuit reversed.
It is necessary to review all agreements and make essential amendments while adopting new business model. This case indicates that Apple may raise prices of iTunes song, if the labels have to pay more to performers.
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