Universal Music Group is being asked to pay the piper when it comes to digital licensing -- and the bill could end up being pretty hefty indeed.
Public Enemy frontman Chuck D (born Carlton Douglas Ridenhour) filed a class-action lawsuit against Universal in U.S. District Court in Northern California on Tuesday, alleging that the music giant has short-changed its artists and producers in licensing deals for digital downloads and ringtones.
The suit alleges that Universal owes its artists "hundreds of millions of dollars in royalties" because of the discrepancies.
According to the suit, Universal's artists and producers are entitled to 50 percent of the net receipts from digital downloads and ringtones.
However, the suit alleges, the company has treated such transactions like sales of physical product. Meaning that not only is there a much lower royalty rate involved, but the company makes deductions for things like containers and packaging -- which aren't an issue for digital downloads or ringtones.
The difference, the suit claims, is massive.
According to Ridenhour's claim, under UMG's current method of accounting, artists and producers receive $80.33 for every 1,000 downloads, when the correct amount should be $315.85 per 1,000.
On the ringtone side of things, the discrepancy is even more drastic. The suit claims that UMG's current accounting method yields $49.89 per thousand downloads, as opposed to the $660 per 1,000 that the suit claims is actually owed.
Ridenhour, who claims breach of contract, is demanding a jury trial.
The Public Enemy frontman isn't the only one claiming shenanigans in UMG's accounting. The trust of deceased "Super Freak" singer Rick James has also filed a class-action suit against the company, also claiming that UMG is treating licensing profits as resale profits. Though the company attempted have the complaint dismissed, U.S. District Judge Susan Illston dismissed that motion Tuesday.
TheWrap was unable to reach UMG for comment.
By Tim Kenneally | Reuters