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Music dispute focuses on sales-versus-licensing distinction

"It seems only fair," says Richard Carpenter, who, along with his late sister Karen, comprised one of the most successful musical groups in pop history. The Carpenters' songs have been widely popular and strong revenue generators in the music industry for decades.

It is that revenue stream and its allocation that Carpenter is referring to in his comment regarding equity.

His contention: Universal Music Group -- which releases the Carpenters' music and pays royalties through its A&M Records subsidiary -- has been ripping off the Carpenter estate by underreporting downloads of the group's music and paying royalties based on the wrong numerical formula.

Carpenter wants that changed, and filed a lawsuit in a California court earlier this week seeking royalty-related damages.

His theory is that the royalties inappropriately categorize downloads as sales, which enables Universal to pay a royalty rate that is far beneath what would be owed if they were deemed song transfers pursuant to a license agreement.

And the latter is what they are, argues Carpenter, who notes the existence of license agreements that are in force between musical labels and Apple that enable the massive technology company to provide downloads to consumers via its iTunes platform.

As noted in an industry article discussing Carpenter's contentions and his related lawsuit, music companies strive to peg downloads as traditional sales, given that the royalties they pay based on that determination materially lag what is otherwise owed when they are considered licensing revenue. The article cites "the classic sales-versus-license debate."

It is a debate that Carpenter says he is eager to engage in before a judge and jury, given his contention that negotiations have failed "to amicably resolve this serious royalty dispute with Universal and A&M."

Many other artists will undoubtedly be paying closest attention to the courtroom spat, hoping fervently that Carpenter prevails.


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