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Sony Music Fights 'Idol' Lawsuit Claiming TheyCheated Show's Stars
Five months afterthe record company founded by American Idol creator Simon Fuller brought ablockbuster lawsuit against Sony Music Entertainment for allegedly cheatingartists such as Kelly Clarkson, Clay Aiken and Carrie Underwood, a New Yorkfederal judge is being asked to make an early determination about the claims.
The litigationexplores quite a bit of ground in the modern music business, from the way in which a music major like Sony accounts for revenueoff of platforms like Spotify and iTunes to how advertising expenditures aretreated. One topic that was largelyovershadowed when 19 Recordings filed its claims this past February was Sony'salleged duty to share the spoils of its proceeds from big battles on thecopyright front. For example, three years ago, Sony was among the record majorsthat extracted $105 million in settlement from file-sharing LimeWire. Does themoney trickle down?
In a motion todismiss filed late last month, Sony argued that it isn't obligated to credit19 such money.
Sony says itscontracts pertaining to Idol alumni "provides for 19 to share in excess recoveries only from legal proceedings that SMEinstitutes 'in the name of  and/or Artist.' It does not apply toproceedings that are brought in SME’s name, including those aimed at stoppingbroad-based copyright infringement of a substantial portion of Sony’s catalog."
The plaintiff'sattorneys responded on Thursday that the contract gives Sony the right to suein the artists' names and compel cooperation from them. The plain meaning of the contract, it's argued, necessitates thatartists be compensated from the proceeds of copyright infringement lawsuits.
"Sony hasmultiple ways to bring suit," says the plaintiff. "The manner inwhich Sony brings suit is of no consequence as to 19’s right to receive aportion of any money which is attributable to Artist’s Masters."
Here are some ofthe other topics in the case:
In the lawsuit, theplaintiff alleges that Sony stiffs musicians by paying the lower of two royalty rates on streamingincome. Specifically, Sony treats music exploited on services like Spotify as"sales" or "distributions" rather than "broadcasts"or "transmissions." The effect of doing this, says the plaintiff, isto account for such deliveries as no different than downloads purchased.
"19's claimthat all streaming services must be accounted for as a 'broadcast' or'transmission' simply seeks to rewrite the plain terms to which it agreed overand over, in agreement after agreement," responds Sony.
Sony says artistroyalties are "unambiguously" tied to the language used in the musicmajor's licensing deals with third party services. If that wasn't so, Sonyargues that there would be no purpose in setting up a contract with twodifferent royalty rates as Sony simply would be obligated to pay the higherrate. The defendant adds that in negotiating the contract, "19 was clearlysensitive to the possibility that it would disagree with the characterizationcontained in the streaming agreement," and so limitations were made forany streaming service operated by Sony or its affiliates.
In other words,Sony says the limitations would be meaningless if never had the possibility oftreating streaming income as distributions.
In opposition, theplaintiff maintains that Sony can't in good faith "mischaracterize" what'shappening in streaming. "This robs 19 of the fruits of the RecordingAgreements by purposefully avoiding using the correct operative words when Sonyknew a 'broadcast' or 'transmission' was precisely what was occurring,"states the plaintiff's legal brief.
The lawsuitaddresses what happens when consumers go to iTunes and buy individual tracksoff an album. Though many of the songs weren't released as "singles"per se, Sony treats them as singles to allegedly avoid having them counttowards album sales that would trigger royalty escalators for the recordingartists.
Again, Sony pointsto the "unambiguous language" of the agreements. "If the parties intended multiple separate sales of Records that arenot Albums to count as an Album, they would havesaid so," says the defendant.
The parties have ahuge disagreement in math.