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American Idol Goes To Court

American Idol may be opening up more than the careers of prospective pop stars.

A $10 million lawsuit has been filed this week, which could have an impact well beyond the Idol Empire.

The successful television entree to fame and fortune for the music industry and its aspirants is also providing a tale of greed and corruption, together with an inside look at how digital media is transforming the music business.

The 12-year-old “Idol”, producing such stars as Kelly Clarkson, is the subject of a lawsuit filed this week by 19 Recordings against Sony Music and it provides a stage for some interesting legal and music industry material.

The Hollywood Reporter received a copy of the proceeding, filed in the NY federal court and which shows some of the technically and legally cutting edge material in the world of digital music.

19 Recordings was founded by American Idol creator Simon Fuller, Hollywood Reporter writes.

The company is now controlled by the show’s owner, Core Media Group. In the lawsuit, 19, and by extension all of the artists — including Kelly ClarksonClay AikenCarrie Underwood andChris Daughtry — who have entered into deals as part of their participation on Idol, claim that Sony Music has been systematically robbing them of millions of dollars in royalties.

The lawsuit, seeking at least $10 million in damages, was filed after 19 exercised the right to audit Sony’s books pursuant to recording agreements, and the parties couldn’t come to any settlement.

“We did not want to have to file this lawsuit, but Sony left us no choice, so this became necessary to protect our artists,” says 19 Entertainment worldwide head of music Jason Morey. “Our complaint lays out the claims in great detail. Everything we have to say about the case is set forth in it.”

Richard Busch at King & Ballow adds, “We have investigated this thoroughly and feel strongly about the claims.”

The claim also introduces some major issues regarding the alleged underpayment of “streaming royalties”, something that could have a massive impact upon record companies and musicians everywhere, not just those within the Idol Empire.

Sony is among the larger music entities that has forged licensing deals with streaming services run by Spotify, Google and Apple.

But the lawsuit says that Sony is accounting for the exploitation of master recordings here as “sales” or “distributions” rather than as “broadcasts” or “transmissions.” The distinction might sound like semantics, but it is nevertheless important. By treating streaming music as sales, Sony is essentially saying that such deliveries are no different than downloads purchased on Apple or Amazon.

And with that, Sony would be forking over significantly less money under the terms of the company’s recording agreements — the difference between a 50 percent royalty share for a “transmission/broadcast” versus a fraction of that for a “sale/distribution.” The plaintiff says the discrepancy has resulted in at least $3 million in damages.

“Such exploitation can only be fairly described as ‘transmissions’ or ‘broadcasts,’ and, upon information and belief, are so described in the licenses or other agreements between Sony and the streaming services,” says the lawsuit. “However, Sony has nevertheless accounted to 19 for all streaming income received at the lower Album rate as if the exploitation between the streaming service and the end user was described as a ‘distribution’ or ‘sale’ and, by so doing, Sony has breached the Recording Agreements.”

The lawsuit then goes into other ways in which Sony is allegedly cheating on music fromIdol alumni.

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