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You can't fault them for trying, but a federal jury handed Eminem's former production company defeat in its lawsuit against Universal Music Group (UMG).

The company's lawsuit asked the question: should digital sales of Eminem's music be treated like physical sales or were they part of a licensing agreement?

The distinction between the two isn't immediately obvious but the difference could have provided F.B.T. Productions LLC with another $1.3m in royalties if the jury found in its favor.

F.B.T. argued that UMG's deal with Apple's iTunes should have been treated as a master licensing agreement, in which case the company would have been entitled to a 50-50 split of revenue with UMG. Instead, UMG believed that digital sales of Eminem's music was no different than physical sales, meaning F.B.T. was entitled to only 12%, which is the rate paid to F.B.T. for physical album sales.

Eminem's former production company isn't the first to question the nature of digital music sales. The Allman Brothers Band and Cheap Trick had asked the same question of Sony Music in the past.

Certainly, record labels are breathing a sigh of relief today. If F.B.T. had won, it would have opened the door to other such lawsuits and could have forced the already hurting record labels to pay out millions upon millions of dollars to artists.

While F.B.T. may appeal the decision, assuming it stands, the real question is whether, going forward, artists won't be more aggressive in negotiating for a bigger cut of digital music sales. Digital music is the future of the business and as more labels push for 360 deals that give them rights to just about everything, one might expect the big artists with some leverage to push back and ask for a bigger piece of the digital pie.

Patricio Robles

Published 9 March, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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