1. BAY STATE COLLEGE
Warner Music Royalties
Is the company the one to blame?
Deborah Chan Studebaker
March 15, 2015
Is a royalties dispute really worth $11.5 Million?
2. Deborah Chan Studebaker
March 15, 2015
Warner Music Settlement
Warner Music Group (WMG) is a business that runs many of the music industry’s well-
known record labels. Some of which include Atlantic, Fueled By Ramen, Elektra, Roadrunner,
and Warner Music. Over the years, they have grown into the third-largest recorded music
business and third-largest music publishing business worldwide (Warner Music Group, 2015). In
this case, the musical group called Sister Sledge leads WMG into a class action lawsuit over
royalties from digital music downloads that they never received.
Sister Sledge1 is a group of female singers consisting of four. They have been signed to
several labels run under WMG in the past. Sisters Debra Sledge, Joan Sledge, Kathy Sledge
Lightfoot, and Kim Sledge Allen, along with actress/songwriter Ronee Blakley, filed a lawsuit
against WMG in February of 2012. The suit was over lost revenue from digital download
royalties. WMG is alleged to have cheated the sisters out of millions of dollars in digital music
sales. Sister Sledge claims that WMG’s method of calculating digital downloads as sales instead
of licenses “cheats artists out of money due to them under recording contracts” (Belloni, 2012)
most of which were signed before digital downloading was made available. According to Sister
Sledge, the record deal they signed in the past promised them 25% of revenue from licenses and
less than 25% from sales (Belloni, 2012). This can make a big difference in the group’s total
revenue. Ronee Blakley claims that WMG promised her 50% on licenses which are greatly less
than what they are paying her based on their calculation of sales.
In response to this class action suit, WMG submitted a settlement to all artists who
claimed that they have been affected by this dispute. A decision to be made is whether the artists’
1 Sister Sledge is a group best known for their song called “We Are Family”released in 1979.
3. Deborah Chan Studebaker
March 15, 2015
should be paid a royalty rate of 6% to 20% depending on each of their rates or on a licensing
basis. This means that either WMG would be split the revenues with the artist or pays the artists
50% of the company’s net revenue (Christman, 2013). The offer put on the table by WMG
consists of a pool of $11.5 million2 to be dispersed to all artists signed under a WMG label in the
U.S. before the date of January 1, 2002. WMG does not claim any wrongdoing upon making this
settlement offer. This settlement mainly allows them to “sidestep the issue of whether downloads
should be paid as a license” (Christman, 2013).
The settlement made by WMG covers the period of January 1, 2009 through December
31, 20123. Any artists who signed contracts before 2002 made approximately $381 million in
downloads and ringtone sales through the U.S. in that time period. In turn, the settlement for
each of those artists would be a pro-rated portion of that revenue (Christman, 2013). There was a
hearing regarding this dispute on January 23, 2014 to decide whether or not the settlement offer
is justifiable. Upon acceptance of this deal, it will only be a temporary fix to the long-term issue
of how to handle payouts to an artist for digital audio. (Martins, 2014)
The Federal Judge assigned to this case granted his final approval of this $11.5 million
settlement on the date of January 12, 2015. This means that Warner Music Group’s long-running
royalties dispute has finally closed and come to a conclusion. The settlement takes effect on the
date of February 25, 2015. The remaining amount of WMG’s $11.5 million settlement after
lawyer’s fees will be dispersed to 2,0524 artists who have laid claim to their rightful royalties.
The company has advertised in national media the opportunity for artists to receive their portion
2 The $11.5 million will includeWMG’s lawyer’s fees and expenses totaling$3 million.
3 This time period is based upon the statute of limitations.
4 40 artists on top of the 2,052 opted out of receivinga portion of this settlement.
4. Deborah Chan Studebaker
March 15, 2015
of what is owed to them in this settlement. They have also created a website to inform any artists
who have a contract dated before 2002 that they are entitled to a portion of this settlement
Upon my observations of this case, I believe that the artists are entitled to the money
claimed to be owed to them. In my opinion, their contracts should have been negotiated and
adjusted at the time digital downloading came to be. Whether or not that the company should be
at fault for not negotiating the artists’ contracts is the real question. This responsibility should
fall on both the artists as well as the company. Both parties are at fault here. The company should
have gave the artists an option during the time that digital downloads became popular. The artists
should have also been paying attention to where and how their music is being sold or distributed.
5. Deborah Chan Studebaker
March 15, 2015
Belloni,M.(2012, February3).SisterSledge FilesClassActionAgainstWarnerMusicOverDigital
Royalties(Exclusive). TheHollywood Reporter.LosAngeles,CA,USA.RetrievedMarch17, 2015,
Christman,E.(2013, December31). WarnerMusic Group SubmitsClassAction Settlement forDigital
RoyaltiesSuit. (T.Comer,Ed.) RetrievedMarch18, 2015, fromBillboard:
Ingham,T. (2015, February25). Warner MusicCconcludes$11.5m SettlementCase with Artists.
RetrievedMarch20, 2015, from Music BusinessWorldwide:
Martins,C. (2014, January 2). WarnerMusic Closeto Settling with Artists overDigital RoyaltiesDispute.
(S.Blackwell,Ed.) RetrievedMarch19, 2015, fromSpin:http://www.spin.com/articles/warner-
Warner Music Group.(2015). WarnerMusic Group Overview.RetrievedMarch16, 2015, from Warner
Music Group WMG: http://www.wmg.com