The legendary Ricky Nelson is still making headlines all these years later, even though he has passed away. The estate of the pop star from the 1950s has gone after Sony because it claims that calculations were incorrect in regards to music streaming royalties.
Back in the day, deductions would be calculated differently to now because of the lack of physical product distribution. Essentially, in those days, global distribution would be broken down in to subsidiaries to help with calculating what the artist would receive in royalties after each income was worked out from each country. It is argued that in this day and age it is not necessary to calculate royalty reducers (level of deductions) in this way. This is because there are now music companies that stretch, as one entity, across the globe but companies like Sony still apply intercompany charges before paying out royalties.
It is argued that Sony apply this intercompany charge on international streaming revenue before they then calculate the royalty’s payable to the artists. This is apparently the case with revenue on Ricky Nelson’s work, on foreign sales and would mean they have violated the contractual agreement, according to his estate. The estate claims that Sony underreports the revenue that has been generated by Ricky Nelson and others, especially on the sales collected in places such as UK and Sony Music Australia. The main issue that has been filed with the suit is that Sony Music ostensibly has complete control over its regional affiliates, so it should not be also taking any more percentages on top.
Specifically, the estate claims that “By assessing an intercompany charge for international sales, [Sony] impermissibly takes up to 68 percent off the top of the international revenue earned from streaming sales, and bases the artist’s royalty rate on the remainder, which methodology directly violates the terms of the artists’ compensation agreements.”
In reference to the class action, which is where a group of people club together and file a lawsuit for the same purpose, the nelson estate said “it was impracticable to determine how many class members there are in the lawsuit, but that it could number into the thousands given the vastness of Sony’s catalogue. The estate put the total claims in the action in excess of $5 million. Each class member has been damaged and is entitled to recovery by reason of Sony Music’s improper practices,” the suit explains. “Class action treatment will allow those similarly situated persons to litigate their claims in the manner that is most efficient and economical for the parties and the judicial system. The injury suffered by each class member, while meaningful on an individual basis, is not of such magnitude as to make the prosecution of individual actions economically feasible.”
It will be interesting to see whether this class action will come to anything, and whether it will ultimately change the way in which music companies calculate royalty payments. If successful this could mean that artists may get paid a greater percentage than ever before.