Sony Sued for $10M Over 'American Idol' Royalties
(CN) - A record label owned by the British company that brought "American Idol" to the United States claims in court that Sony Music Entertainment cheated it out of more than $7 million in royalties.
19 Recordings Limited, the label of British entrepreneur Simon Fuller, claims Sony licensed "some of the biggest hits of the 21st century" by "American Idol" alumni who landed record deals with 19. Those artists include Kelly Clarkson, Clay Aiken, Carrie Underwood, Chris Daughtry, Kellie Pickler, Jordin Sparks, David Archuleta and David Cook, according to the federal lawsuit in Manhattan.
The record label claims it learned through subsequent audits that Sony was underpaying royalties.
"Despite Sony's systemic underpayments to 19, 19 attempted on several occasions to settle its claims with Sony," the label says.
This hasn't happened yet, according to 19, because Sony has refused to provide the necessary books and records so that auditors could calculate potential claims.
"Despite Sony's failure to provide all this necessary and relevant documentation and information, 19 has nevertheless been able to determine a number of ways in which Sony has breached the recording agreements and underpaid royalties due, but many more breaches and underpayments would likely be found if 19 and its auditors were given full access to Sony's books and records as the recording agreements expressly provide," the lawsuit states.
The label says Sony breached the agreements by: underpaying royalties for streaming music; incorrectly deducting the cost of TV ads, foreign income tax and "a number of unsupported charges" from royalties due; improperly lowering 19's royalty rate for joint venture compilation albums; failing to increase the royalty rate by 1 percent when worldwide record sales topped 1 million; under-reporting record club royalties; failing to pay for songs used in movies and on TV; and failing to give 19 a cut of the awards and settlements it won in piracy lawsuits.
"After 19 submitted its numerous claims set forth in the audits, Sony falsely manufactured counterclaims in an attempt to force 19 to settle for an amount less than what is due," 19 says.
Sony had claimed it overpaid 19 for compilation albums and individual track downloads, but the record label calls the counterclaims "illogical and without merit."
19 Recordings demands $7 million plus $3 million in interest for breach of contract and breach of good faith. It also wants Sony to pay its attorneys' fees and costs.
The record label is represented by Richard Busch of King & Ballow in Nashville.