Tracks sold over the Internet usually go for about 99 cents. About 70 cents of the sale price goes to Sony. The bands are getting about 4 1/2 cents per song, according to the suit, rather than the approximately 30 cents they claim is rightfully theirs.
Sony has been paying the aging rockers less than their fair share amount, in part because their record deals predate the existence of legal music sales over the Internet. According to the suit, the record company is treating digital downloads like traditional record sales, rather than licensed music, triggering a different royalty deal. Under that old rubrik, the record company deducts fees for the kind of extra costs they used to incur when records were pressed on vinyl, including packaging charges, restocking costs and losses due to breakage.
While the amount of money at stake per song is small, it could add up to millions of dollars for Sony if a court rules for the bands. Caplan estimated that there may be 2,500 recording artists covered by the class.
IMO – Sony is screwing over the musicians here by allowing an outdated contract to apply to a modern situation. The “packaging” charge they’re charging bands DOESN’T EXIST with internet downloading, and the “breakage” charge has been bogus for quite some time. It really applied in the days of actual records, a lot of which wouldn’t survive shipment. How many CD’s (or tapes for that matter) end up broken per shipment? Definitely not 15%.
The “breakage” charges started when music was distributed on records made of shellac, before the advent of vinyl. Shellac records were very brittle and very fragile, and when you packed a bunch of them in a box and shipped them to a store, it was pretty much guaranteed that some of them would arrive broken. At first the store owners and distributors tried to actually count how many were broken and adjust the invoices appropriately, but that was just too hard, and allowed merchants to take advantage by claiming a higher level of breakage than actually occurred. So they compromised and set an arbitrary percentage reduction of every invoice to cover broken records. The number chosen was about right, and it worked for everyone.
Sony in my opinion, owes alot of artists (comes to about 2,500) royalties for missed payments since digital downloads (around 2001, 2002?) became popular and a renegotiation of alot of contracts.