Labels may owe millions because of double session CDs

I spotted this story from C|Net via Slashdot. It seems the labels could possibly be liable for back payments to the publishers due to "double session" CDs. Recently, many labels have been selling discs with the tracks in typical CD audio and also providing the same track as well, in protected digital form. This was to allow the use in other digital devices such as players.

Well, the publishers say that the deal is, they get paid by the piece, not by percentage of revenue. They argue that due to this fact, they are to be paid for both tracks, even though they are the same track. Of course the labels see it differently so the debate begins.

The negotiations are going on without any litigation at this point. However, it is getting tense and the labels are continuing to churn out the discs without paying, by the millions. If they lose their gamble, they could end up owing millions to these publishers. With withering profit margins already, this will be a strong financial blow to the labels and a windfall to the publishers and musicians.

Music publishers and songwriters, who are entitled to payments of a few cents for every copy of a song sold, contend that since these double-format discs hold two copies of songs, they should be paid for both copies. They've been negotiating with record labels for months, but already hundreds of millions of discs have been released around the world, raising the possibility of huge back payments. "From a legal standpoint, the position of the music publishers is that these discs contain two separate (copies of each song)," said Cary Ramos, an attorney representing the National Music Publishers' Association (NMPA). "The fact that they are the same recording doesn't mean that we should treat it as one." Music publishers see the shift as an opportunity to recast decades-old contracts with record labels that have left them with a relatively small fraction of the sale price of a CD. Copy-protected discs offer a big chance to do so, since the lion's share of unauthorized files traded on file-swapping networks comes from unprotected CDs.

Macrovision alone, says its double-session technology has more than 200 million individual compact discs out there in the market already, for a total of about 2 billion tracks, around the world. At even just a few cents a song, that represents tens of millions of dollars for record labels if they end up paying for the second session tracks. Publishers have long been critical of the slim slice of the profit they receive from the labels. So, maybe this is payback time. The worm has turned so to speak.

Initially, the labels seemed to be the stumbling block, keeping music from entering the digital age. Now, the scene shifts to the publishers and musicians that are gaining more power even as a scattered group. You can visit C|Net to read more about this fascinating situation.

Source: C|Net News