Lit vs. Sony | Matt Connarton Unleashed

0:00 I did not know that this was going on. But you know, artists suing record labels is not a terribly unusual thing, it would seem. And usually when we talk about one of these stories, it's usually Universal music group that is being sued. But this time it was not. This time it was Sony Sony Music. You know. It's funny because when Al was on the show, we were talking about talking a lot about the nineties. Well, there's a nineties band called Lit who had a song, you might remember, a pop punk song called My Own Worst Enemy, and they have just settled a streaming royalty lawsuit with Sony Music.

0:37 You know, again, artists suing labels over royalties is not a new thing. And that predates the Internet, that predates streaming. It is not unusual for an artist or an accountant who works for an artist, and so on and so forth. The business manager who might work for an artist to at some point in time say, hey, I think we're missing some money. I don't think you know this. My client here has been has been selling millions of records and they're only getting a small pittance. And uh, the legal department looked at the contract and apparently there should be a lot more money than what is currently going to my client, et cetera.

1:20 So maybe we need to sue the label over that. It's not a news story now. The taking that and applying it to the era of streaming, which we're in, that part is somewhat new, although not really that new in twenty twenty six. Streaming has been around for a couple decades now. But but these stories continue. But I didn't know that this one was going on. I didn't know that Litt was suing Sony Music. It says here, and again, this is from Music Businessworldwide dot com, which, if you're a regular listener, you know, one of my absolute favorite sites for music industry news.

1:55 It says, LIT, the band behind pop punk hit My Own Worst Enemy, settles Sony Music stream royalty lawsuit. Litt, the rock band behind the nineteen ninety nine single My Own Worst Enemy, has settled its lawsuit against Sony Music Entertainment over streaming royalties. Never liked that song, by the way, not that I don't like Litt, They're fine. I just don't like that song. The band and the major label reached a settlement in principle, according to a July seven court filing reviewed by Music Business Worldwide.

2:29 Neither Litt nor Sony has disclosed the terms, and a written agreement is still being finalized. US District Court John P. Cronin closed the case on Tuesday after being notified of the deal, which was first reported by Billboard. The members of Lit sued Sony in the US District Court for the Southern District of New York in March over their streaming royalties. The complaint was brought by frontman aj Popoff, guitarist Jeremy Popoff. I assume they're brothers, bassist Kevin unless pop up Off is a common name, which it's not, bassist Jeremy Baldez, and the estate of late drummer Alan Schellenberger.

3:09 As Music Business Worldwide reported at the time, Sony, which acquired RCA Records years after the label signed the band in nineteen ninety eight, had been paying the musicians a fourteen percent US royalty rate on streams. Quick note here before we go any further, that's another thing that happens a lot consolidation. Right, one record label buys another record label. Now, all of a sudden, some of the artists who were on the record label that got bought, they're not getting their money. Or you know, there's a term that I learned a couple of years ago that is common in the well.

3:47 It describes a practice common in the music business, spaghetti accounting, which is where the accounting is done in such a way that it makes it it makes it very more convoluted than it necessarily needs to be, which makes it hard to do forensic accounting, which is and you try to figure out where the money is going, and why some of the money isn't going where it should be, and or why not enough of the money is going where it should be going, et cetera. But this is a thing when when one record label buys another, if you're on the record label, it's being purchased again.

4:15 This is something where if you're that artist, you want your legal team, you want your management whomever is keeping an eye on this, you want them in there making sure that you're getting everything that you have coming to it. Says here. The band argued the nineteen to ninety eight RCA contract entitled it to fifty percent of net receipts whenever a master is licensed, treating an on demand stream as a master use license rather than a sale so master being the master recording of the song, which is obviously what gets distributed to these streaming platforms because the streaming platforms obviously you want, but the platform to have the highest possible quality file of your music if you're an artist on a platform.

5:07 Right, But according to the band argues or their legal team argues, according to their RCA contract, they're titled to fifty percent of net receipts when the master is licensed. So in this case, the master is licensed to a streaming platform, so fifty percent of that revenue that's generated by that track on that platform. So continuing on again this article for Music Business Worldwide. In a in a parenthetical, the band's nineteen to ninety eight contract gave an example of such a license. Quote RCA's license to another person of the right to embody a master recording on a website in a so called streaming format, which is not subject to the digital download of that master recording by a viewer.

5:54 Unquote. When the nineteen ninety eight deal was signed, Napster had not yet we Will lunched, and streaming services such as Rhapsody did not arrive until the early two thousands. Litt claimed the language entitled it to more than eight hundred thousand dollars in unpaid streaming royalties. The band's attorney, Chris Vaeos, in the complaint said, quote Sony's failure and or refusal to account properly to plaintiffs for streaming royalties received from licenses from third party DSP's digital service providers under the nineteen ninety eight agreement as damaged plaintiffs in excess of eight hundred thousand dollars in unpaid royalties, as reflected on royalty statements rendered from January one, twenty twenty one, through December thirty one, twenty twenty six, unquote.

6:48 The complaint also alleged that Sony used the wrong formula for video streaming royalties and that it never applied the escalated rate it's deal called for one. A Place in the Sun, which is the album that that song was on, reached gold and platinum status. That's you know, the song Mound Worst Enemy that's from the album A Place in the Sun. Reduced royalty reporting had also lowered the band's pension contributions and affected its health insurance eligibility through SAG after, the complaint said.

7:25 According to the complaint, the band had tried to renegotiate since twenty twenty three, but Sony offered a half hearted defense of the rate before it stopped responding. Vius said in March, quote, this is something that we were helped. We were hoping we could resolve before having to file a lawsuit unquote. A lawyer for Sony later said in a May court filing that the band had begun settlement talks after suing. According to Billboard, MBW Music Business Worldwide has reached out to Sony Andlitz management team at Shelter Music Group for comment.

8:00 The case landed as Sony faces other royalty claims in the same New York court. Again, as I said, this is a common story, and they use these labels, use spaghetti accounting to make it very difficult to figure out exactly what's going on, what is not happening that should be happening, and so forth. They make it very complicated for a reason, for the same reason anybody who makes their accounting very complicated does so to you know, it's and it's not even necessarily I don't know that they're trying to hide stuff, but they're certainly trying to make it so it's not easy to find.

8:36 I guess that is an effect hiding something, but but they don't. They don't want you to figure out how. You know, Universal Music Group we talked about this on the show. Universal Music Group and again not to conflate them with Sony, but they've been sued a bunch. They were I don't know whatever happened to it, but we talked about it on the show. Limp Biscuit was suing Universal Music Group because apparently you and if you're an artist on UMG, you are provided with a portal. So it almost sounds like, you know, like if you're if you have a bank, a bank account, and you know, use your portal to check your banking information, your your balance and whatever.

9:16 You log into the portal. Right, UMG actually has a portal for their artists, their signed artists, where they can log in and check what's going on with their royalties, how much they're owed, or how much they might owe in recruitment, which is another subject. We won't take that side three right now, but you can check all that through this portal. But apparently the portals don't always work, you know. Olympus gits accountant was trying to or accounting firm was trying to sign into the portal at one point, and they didn't have the right password, and they tried to create a new password, but the portal wouldn't let them, so they had to come.

9:59 I mean, really, this is wild, right that this goes on. And then so they try to contact somebody at Universal Music Group to up so they could update their passwords so they could get into the portal, but no one was getting back to them. This is how these labels treat their artists. It's just a fact. This is how these artists are treated. And you can say, well, I don't really care how somebody who's rich and famous is treated by their record label. What's the matter. They're rich and famous, so what talk about your first world problems?

10:37 I get that, but but it doesn't just happen to artists who are already rich and famous. You know, the guys from LIT they had that one huge hit. I don't remember if they had any others. If they did, I'm not remembering them, which makes me think, and I have a pretty good memory for that, but I don't always remember everything, so maybe they did. I don't remember, Like I remember them being really big off of that song for a sh short period of time. But I can tell you this, Being really big off of one song for a short period of time does not make you rich.

11:09 It helps, it doesn't make you rich. Being really big over a prolonged period of time might make you rich. But if you have one hit song and one platinum album, you're not, you know, I mean, unless you take really good care of your money and you invest in all that. But but just based on that alone, that income alone, you're not wealthy for the rest of your life based on that. So you know, no one should be treated this way by a record label. This is why there's so much antipathy toward the major labels, the major label system.

11:42 When you ever hear anyone say something nice about Universal Music Group or Sony or Warner Brothers or any of these label When do you ever hear anybody say, you know, they really you know, if you're signed to that label, they really treat you right, they really take care of the artists. That's gone. I mean, now, even if they do sign you, they want you to already be a ready made package, which that part I understand. They want you to already be at the very least Internet famous before they're going to make you really famous, right or try to.

12:15 But it's a terrible system. I mean, they really abuse, they really abuse their artists. Okay, So getting back to the article, because there's an example here of what I'm talking about. And again this is from Music Business Worldwide dot com. It says here Jermaine dupri and is so so deaf Companies sued Sony for more than eighteen million dollars on Monday, July sixth, alleging unpaid and underreported royalties on records by Criss Cross, Escape Usher and Mariah Carey eighteen million dollars. And now I understand just because they're suing for that, that doesn't mean that that is accurate and that they are actually owed that much money.

13:00 But it wouldn't shock me especially Well, let's look at that phrase, alleging unpaid and underreported royalties. That's part of how and again that plays into the spaghetti accounting underreported. In other words, some royalties are reported, but some are not. Why would you do that? Well, if you report enough royalties and you pay out enough in royalties, maybe no one gets suspicious, Maybe no one starts asking questions. Maybe no one says let's look at the books and figure out if we're actually getting all that we're supposed to, because we probably are because we're getting money.

13:36 But what if you're actually owed more money? So you know, they're not just gonna forget to pay you. They're gonna pay you something. They might just not pay you everything that you're owed, because as long as they pay you something, maybe you won't start snooping around. Because if you hire a forensic accounting firm and you start snooping around, you're gonna find out that you're owed a lot more than what they are telling you that you're owed. So that suit is for eighteen million dollars. It says here that suit is active, and Sonya has said the parties were attempting to resolve the accounting dispute before Dupree went to court.

14:13 Sonya settled similar claims before the company reached a settlement in twenty eighteen with Nineteen Recordings, the record label behind American Idol alumni including Kelly Clarkson and Carrie Underwood, which had accused Sony of underpaid streaming royalties by accounting for streams as sales rather than licenses. In twenty twenty Sony agreed to pay twelve point seven million to settle a class action brought by the estate of nineteen fifty singer Rick Nelson over royalties on foreign streaming revenue.

14:47 Such disputes have become more common as legacy artists challenge how labels calculate streaming royalties under contracts signed before Spotify. Litt continues to tour, with dates booked across twenty twenty six. My Own Worst Enemy has drawn more than five hundred and eighty million streams on Spotify. According to the band's complaint, it spent eleven really eleven weeks at number one on Billboard's Alternative Airplay chart. The band's nineteen to ninety nine album A Place in the Sun was certified platinum in the US.

15:19 It released its most recent album, Tastes Like Gold, in twenty twenty two. The dismissal gives the party's forty five days to restore the case if the written settlement is not completed. Yeah, and again, they probably need that money. The band probably needs that money. One platinum album, one big hit song that does not make you rich. You're not set for life based on that. I promise you You're not it's like, you know, we were we kind of were talking about that a little bit with Al from the band I when we were talking during our conversation about you know, people have misconceptions and misperceptions about how this all worked.

15:53 They think you get signed and now you're famous and you're rich, and you know, you can be very famous and be broke. It happened to TLC when they released their album Crazy Sexy Cool in the late nineties. They were triple platinum and they were broke because of the way their record deal was structured. They had no money and they'd sold three million copies of that album on the strength of singles like Creep and Waterfalls and all that. I mean, it's the map. The system is all. Look, this is true in life in general, right, The system is always against you.

16:33 You got to fight for every little crumb because the system is always trying to screw you in some way. In this case, it happens to be the major label system of these record companies, but they're always trying to screw somebody over and they'll do whatever whatever they they can get away with.