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Court Ruled Eminem Contract Loophole Could Cost Label $50 Million

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The Detroit fee press recently reported The US Supreme Court has denied Universal Music Group’s (UMG) appeal of the lower court ruling against them that involves royalty payments, rapper Eminem, and Detroit based F.B.T. Productions.  This decision could cost UMG anywhere between $40-50 million.  This is because F.B.T., who originally brokered Eminem’s 1998 record deal with UMG’s Interscope Records, claimed in its initial 2007 suit that UMG’s digital media aspects of their contract was based on the terms of a typical licensing agreement. This would require Universal to pay back 50 percent of its net revenue made from digital downloads. Naturally UMG argues that they should owe a typical royalty payment that would be closer to 18 percent of the suggested retail price, just as  they normally owe for royalties physical CD sales.

All of this stems out of the fact that Em’s contract was drafted and agreed upon prior to the common use of MP3’s, and the current standards of digital music market place.  Joel Martin of F.B.T. told the Free Press, “Every artist who has this sort of language in their contract is now going to go back to their record company and say, ‘OK, so what do you want to do about [download royalties]?’”  Because this loophole potentially presented to nearly every artist with a record contract that predates the digital era, there is speculation that it could cause a ripple effected change in how digital download royalties are agreed upon in the entire record industry as a whole.   Eminem himself was not personally involved in the suit.