The Hollywood Reporter revealed quite the exclusive on Friday: James Taylor is suing Warner Bros. Records for just under $2 million over discrepancies in money owed him for a number of categories but most significantly over digital downloads. Variety also covered the story, providing some additional information. He joins a number of musicians making similar legal moves over royalties for digital downloads, including Michael McDonald, Peter Frampton, Kenny Rogers, George Clinton, “Weird Al” Yankovic, and others.
The article also reveals some details about James Taylor’s contracts with Warner Bros., where he had his commercial breakthrough following the commercial disappointment of his self-titled debut on Apple Records. His time with WB included the albums Sweet Baby James, Mud Slide Slim and the Blue Horizon, One Man Dog, Walking Man, Gorilla and In the Pocket, as well as the original Greatest Hits compilation, which has sold over 12 million copies.
According to The Hollywood Reporter, James Taylor signed his original contract with Warner Bros. in October 1969. This contract was amended in January 1972 following the success of “You’ve Got A Friend” the year before. From The Hollywood Reporter:
Like many musicians, Taylor got a deal that treated records “sold” different than when recordings were “licensed.” The royalty rate for Taylor for sales is between 10 to 12 percent. The royalty rate for licenses is 50 percent of net receipts.
The dispute now comes in the interpretation of whether a digital download (from iTunes, Amazon, or other sources for legitimate MP3s) is considered a sale or a license. Naturally the record label wants to pay out the cheaper rate and the artist wants to receive the higher rate. From Variety:
As in more than a dozen class action and individual suits filed against the major labels since early last year, Taylor’s suit cites the 2010 appellate court decision in F.B.T. Productions’ suit against Aftermath Records – the so-called “Eminem case” – which ruled that download and ringtone royalties should be computed at a higher rate under contractual agreements governing licenses and not sales.
In 2010, a statute of limitations was set on this issue, which expired on Friday, September 14. James Taylor’s attorneys filed their complaint the day before.
In 1976, Warner Bros. failed to renew their contract with James Taylor, so he signed with Columbia Records, which produced the multi-million selling album JT in 1977 and remained his home until 2000.
In October 1979, James Taylor and Warner Bros. Records signed a “termination and settlement agreement” that modified the payment rates of the 1972 agreement and added certain auditing rights. This 1979 agreement was the structure used until 2002, when a new amendment was added that further revised the rates (presumably lower) in exchange for the much-rumored remastering and re-release of his Warner Bros. catalog as well as a new Greatest Hits-style compilation. The reissues and new compilation were never produced, so James Taylor’s attorneys consider the 2002 amendment null and void, and have been auditing what he’s owed using the 1979 rates since 2004. From The Hollywood Reporter:
The results of two audits [covering Jan. 1, 2004-June 30, 2007 and July 1, 2007-June 30, 2010] have purportedly turned up several forms of underpayment.
This includes smaller ticket items like foreign receipts, budget sales and the unauthorized use of Taylor’s songs on certain compilation albums. It also includes intriguing items like an alleged smaller-than-expected share of proceeds from WBR’s $110 million settlement with Napster (Taylor got 0.24 percent instead of the claimed amount approximately 0.33 percent).
But the biggest gap comes from the digital downloads side because of that 10-12% vs 50% discrepancy, which equals nearly $2 million.
Taylor’s suit claims that the lower royalty rates Warner paid for digital downloads and ringtones are “applicable only to phonograph records…and are not applicable to the licensing of the masters.” It also notes that the lower payments are “wholly inconsistent with the historical practice…and the conduct of Warner Bros. before this dispute arose.”
James Taylor has made several comments in interviews voicing his displeasure over the Warner Bros. contract, so while it’s rare to see him make such a move, it’s not completely out of the blue.
James Taylor is being legally represented by Paul Duvall and Richard Busch at King & Ballow. No date is set and these things are usually a lengthy process. The next step is for Warner Bros. Records to file a response, where they’ll probably present their side of the story to try to get the case dismissed without going to trial. We’ll continue covering this case as more information is released.