D-day for downloads

The US federal court for northern California is housed in a huge 1950s modernist office block in the centre of San Francisco. The cases being heard within its cleanly designed 21 floors range from Apple’s multibillion-dollar patent dispute with Samsung to the less titanic tussle between H&B Beauty Supplies and Posh Hair Salon Incorporated.

Among the litigation is a class action suit whose outcome could have profound implications for the music industry. “James v UMG Recordings” is a dispute about how much money musicians should receive from digital downloads of their work. Brought against the world’s largest record label, Universal Music Group, by the estate of Rick James, the funk star who died in 2004, it revolves around an apparently obscure technical detail – whether downloads should be classified as “sales” or “licences”.

What’s at stake isn’t so obscure. Record labels pay between 10 and 20 per cent in royalties to musicians for sales of their music. But they pay as much as 50 per cent when music is licensed, when songs are used in films or ads, for example. The royalty rate for music sales has historical roots in the costs the labels assumed for pressing records and CDs, transporting them to shops and promoting them. So why, the talent argue, should the labels get the same rate when the bulk of those costs are gone?

The labels, unsurprisingly, want to continue classifying downloads as “sales”. Insiders believe iTunes and the like are simply record stores without the bricks-and-mortar, a continuation of the core business of selling recordings. Also they are still manufacturing CDs, which made up more than half of global sales last year. And promotional costs haven’t disappeared; indeed, promotion in the digital age makes the old days of keeping fan clubs happy with signed photos look like child’s play.

Musicians, just as unsurprisingly, want downloads reclassified as the more lucrative “licences”. If the James estate’s class action were to force an across-the-board change, then it is estimated that the retroactive cost for the labels could be more than $2bn from iTunes sales alone. Nervous looks are being directed at San Francisco’s federal court.

“The suit had been brewing for a while,” says Rob Zombie, a named plaintiff alongside the James estate when the case was brought against Universal in 2011. “Plaintiff Rob Zombie,” the court document introduced him in its groovy legal way, “also known as Robert Wolfgang Zombie, formerly known as Robert Cummings, is a performing and recording artist currently residing in Los Angeles”.

Zombie fronted White Zombie, a horror movie-obsessed heavy metal band that had chart success in the 1990s, after which he launched a solo career. A new album is due in April, bearing the excellent title Venomous Rat Regeneration Vendor, and he has a side career directing the latest instalments of the Halloween film franchise.

The shock-rocker was one of a number of acts to join the James estate’s class action suit. Most of the others, unlike him, are heritage acts from the pre-download era; they include David Coverdale of 1980s rockers Whitesnake and Chuck D, leader of seminal rappers Public Enemy. Still more are pursuing separate allegations of back-catalogue underpayments against major labels, from disco queens Sister Sledge to Motown greats the Temptations.

Last year, hippie troubadour James Taylor launched a court action against Warner Bros Records. Because the action is ongoing, he didn’t want to comment for this piece but supplied me with a copy of the complaint he filed: a 75-page legal document with a detailed litany of gripes about download and ringtone income. The ringtones are surely not worth much – does anyone actually own a James Taylor ringtone? – but the downloads are a different matter: the singer is suing Warners for $2m.

Hostilities between money and talent are nothing new but in the digital era the biggest victories so far have been notched up by the talent. Sony settled a six-year-old case last year, agreeing to pay a number of artists, led by the Allman Brothers and Cheap Trick, a total of $8m. Also last year, Universal paid an undisclosed sum to end a download dispute with the production team behind rapper Eminem’s breakthrough hits – the settlement followed a 2011 legal decision in the same case that download sales should be treated as licences, though the ruling only applied to the contract under litigation.

What the record labels dread is a ruling that would establish a legal precedent. Such a landmark case would open a Pandora’s box of irate heritage artists demanding compensation. The result, as in the case of “James v UMG Recordings”, is a courtroom war of attrition. Zombie and the other acts in the suit have been fought every step of the way by Universal’s legal team. It is turning into pop’s version of Bleak House’s eternal lawsuit, Jarndyce v Jarndyce.

“Unfortunately these things just drag out for years,” Zombie says. “Every time I would call to check in, my lawyer was like, ‘I’ll tell you when something changes.’ Checking up on a court case will just drive you crazy.”

Towards the end of last year, the case was amended to allow Zombie to drop out as a lead plaintiff: his original record contract fitted the bill but he renegotiated it several times so it’s no longer “typical” of the rest of the members of the class action. The judge allowed him to withdraw “without prejudice”, despite Universal’s objections, which means he can continue in the suit as a non-lead plaintiff.

“Two years from now I’ll get an exciting phone call or not. As of right now I don’t know,” Zombie says. The legal game of cat and mouse continues.

Pop’s adaptation to the download age has been far-reaching but haphazard. It is now almost a decade since Apple’s iTunes store opened its virtual doors to paying customers. Within five years of its launch in April 2003, it was the US’s largest music seller; in two more, it was the world’s largest.

Last month it celebrated the sale of its 25 billionth song, just one of the 15,000 songs downloaded each minute on iTunes worldwide. The virtual store’s mind-boggling figures – a catalogue of 26m songs, 21.6m songs sold daily, $2.1bn of revenue generated in the last three months of 2012 (including sales of apps and films) – have radically reshaped pop’s landscape.

At first the changes were unsettling. But now nostalgia for the way we used to listen has become an oddly enjoyable sensation, an excuse to wallow in the past, as with the outpouring of unconvincing affection for the venerable but bland British record store chain HMV when it went into administration this year.

The scale of the changes is such that even iTunes is feeling the heat. Apple has claimed in the past to run the store at “a bit over break-even”, and its iCloud service clearly anticipates changing trends as people move to the Spotify and Pandora models of subscription services from some distant digital cloud. Perhaps it won’t be long before we’re waxing nostalgic about our first iTunes purchase.

“The younger fans who are coming up, it means nothing to them,” Zombie says of the technological churn. “It’s like listening to your grandparents cry about the death of radio and the big bands. It’s like, after a while you go, ‘OK grandma, I don’t care.’ Things just change. It’s always an evolving thing, and the artists and the fans all have to evolve with it.”

Last week it was revealed that global recorded music revenues grew for the first time since 1999. The news was greeted with talk of the worst being over. Yet the line demarcating old and new is fuzzier than that.

Differences between eras can take years or decades to unfold. Silent films didn’t stop being made when The Jazz Singer was released in 1927; it was another three years before Garbo spoke. The slippages are especially acute in pop, where many performers have careers straddling analogue and digital eras. Contracts signed in an age when vinyl was the only means of distributing music are still legally binding at a time when a master recording can be made available to millions at the press of a button.

Of course, none of this would matter if no one bought old music. But here’s the curious thing: technology has provided unparalleled access to pop’s past. Its vast back catalogue is available to anyone with a computer, there to buy whenever the urge strikes. Download in haste, repent at leisure.

Pop’s ability to make the past seem present again is especially acute in an age when we can download all David Bowie’s albums in moments; The Best of Bowie reached number seven in the UK download chart after his comeback single was released last month. Another illustration: at the beginning of December, auditioning for the semi-finals of US talent show The Voice, contestant Terry McDermott sang a cover of “I Want to Know What Love Is”, the 1984 hit by soft-rock titans Foreigner. It won a wild ovation from the audience and extravagant praise from the show’s judges. “Terry,” said Cee-Lo Green, “I love you. I love that rendition.”

The next week both McDermott’s version and Foreigner’s original entered the iTunes top 10. The song was back in the charts almost 30 years after its release – a Lazarus-like revival its creator could never have anticipated. “Absolutely,” agrees Mick Jones, Foreigner’s guitarist and chief songwriter. The British-born rocker founded the band in the US in 1976 – “I thought we’ll give it a couple of years ... but we just seemed to go on,” he says. Indeed, though rock snobs were snooty about their arena anthems, Foreigner were one of rock’s biggest draws well into 80s, with more than 80m album sales.

These days, Jones is the only surviving original member and the band is a fixture on the heritage circuit, currently playing casino resorts alongside the Chippendales and Cheech & Chong. Yet while packed arenas no longer thrill to Jones’s guitar solos, his songs are enjoying a healthy afterlife.

Last year he was presented with a gold record when Foreigner’s 1981 hit “Juke Box Hero” reached 500,000 downloads. Its revival followed appearances in the musical Rock of Ages, the television series Glee and the video games Guitar Hero III and Rock Band. When the film version of Rock of Ages came out last June, the band’s iTunes sales leapt 400 per cent.

Jones is watching the sales and licence dispute with interest. “They [the labels] did come up with a number of little booby traps in the 1970s,” he says with a chuckle, “which were not really fair, which were perhaps fair at the time. We’re just sitting back and keeping an eye on things. Whether at some point we’ll get involved, I’m not quite sure yet.”

This year also sees the activation of a 1978 US federal ruling that musicians should be allowed to gain control of the US copyright of their recordings after 35 years. That means that Jones would be able to apply for the copyright to Foreigner’s first two albums. “We’re talking about that at the moment, thinking about it. Obviously the record companies have their points of view, and we artists have our point of view,” he says reasonably. But then the clincher: “You like to feel at one point the album you’ve created and paid for will come back to you.”

Heritage rockers are in an odd position. Digital downloads have reanimated the potential value of their back catalogues: in 2011, they accounted for more than a quarter of all downloaded tracks in the UK. Yet the value of many of those same back catalogues are tied to recording contracts drawn up when downloads were the stuff of science fiction.

Leading New York music lawyer Michael Sukin believes the majors were probably aware of the problem with the contractual status of downloads “from the get-go. They basically ignored it for years. And then they adopted no kind of general industry policy. When they got into it, it was every man for himself. But it’s the nature of the record business to wait until something happens.”

The labels’ tactic, says Sukin, is to fight each dispute on a case-by-case basis, relying on the cost of US justice to deter other complainants. Their cause is helped by the fact that, like Tolstoy’s unhappy families, no two recording contracts are alike. There is much scope for courtroom wrangling.

Yet digital back catalogues are likely to grow in value – if the likes of Foreigner continue seeing 500,000 downloads accrue for old hits that turn up in films or TV talent shows. Surely, at some point, it will become financially rational for musicians to address what they perceive to be unfair terms of payment. Similarly, surely a progressive, forward-thinking music industry would seek to pre-empt them by altering the terms of past deals to take account of new conditions?

“A progressive, forward-thinking music industry?” Sukin repeats slowly, as though mulling the words of a madman. “This is a capitalistic world, you know. Artists and record companies are on different sides of the bargaining table.”

The old ways of selling and buying music have been swept away, like the shuttered HMV stores on British high streets. But downloads have not got rid of old music; instead, they have revived it. Thanks to iTunes and its like, songs from previous decades are more available than at any point in history. Furthermore, the pace of technological change is fuelling a nostalgic appetite for them. Technology has created an unresolved and urgent question. Who owns pop’s past?

Ludovic Hunter-Tilney is the FT’s pop critic

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