Summary:

Sony’s music labels have agreed to pay almost $8 million to bands like Allman Brothers and Cheap Trick which claim the company shortchanged…

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Sony’s music labels have agreed to pay almost $8 million to bands like Allman Brothers and Cheap Trick which claim the company shortchanged them for online songs and ringtones.

The settlement comes a year after rapper Eminem won a court case that concluded that music downloads from iTunes are licenses, not sales. The distinction matters because, in the case of licenses, labels have to give artists 50 percent of revenues and not the 12-20 percent rate artists receive from CD sales.

Under the terms of the settlement, Sony (NYSE: SNE) will set aside $7.65 million to be divided among artists whose songs were downloaded more than 28,500 times. Lawyers fees and related auditing expenses will be deducted from the amount.

The deal also calls for a smaller pot of $300,000, with no fees deducted, to be divided among artists whose songs were downloaded fewer than 28,500 times.

In some cases, bands will be eligible for an additional 3 percent in royalties for downloads after January 1, 2011.

The settlement grows out a class action filed in 2007 by the Youngbloods on behalf of other bands who argued that imposing CD-style rules in the digital era was unfair. The deal, which is the result of a five-year legal meat grinder, also covers a parallel class action involving the Allman Brothers and Cheap Trick.

A copy of the proposed settlement is below.

Young Bloods Sony Settlement

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