Class Action Filed by Former Beach Boys Member Claims UMG Underpays Royalties for International Streaming

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David Marks, former member of the Beach Boys, has filed a proposed class action against UMG Recordings, Inc. over the music behemoth’s apparent practice of failing to pay artists the full amount of international royalties owed to them.

According to the 20-page case out of California federal court, UMG, the parent company of Capitol Records and numerous other music labels, has taken for itself a portion of the revenues for international streaming before calculating musicians’ royalty payments, thus underpaying the individuals and exploiting their work. The case claims the defendant conceals its conduct by underreporting revenue from foreign sales and, in royalty statements and accountings, records royalty payments as a percentage of the revenue reportedly received by UMG from its foreign subsidiaries.

“Through these accounting machinations, Defendant essentially conceals and keeps a portion of the international streaming revenues generated by its foreign affiliates without accounting for or paying a fair share to Plaintiff and Class Members,” the complaint scathes.

UMG, according to the case, is responsible for the accounting and payment decisions for musicians who have been signed by the company’s record label subsidiaries, including Abbey Road Studios, Bravado, Capitol Music Group, Capitol Records U.K., Decca Records, Def Jam Recordings, Deutsche Grammophon, EMI, Interscope Records, Geffen, AM Records, Island Records, Motown, Polydor, Republic Records, Universal Music Enterprises, Verve Label Group, and Virgin Music. In exchange for licensing and marketing artists’ work, the defendant, the suit says, “is paid a significant share” of their earnings and is contractually obligated to pay the individuals their share of royalties, which is purportedly based off “one hundred percent of the international streaming revenues.”

According to the case, however, UMG keeps a percentage of the international revenues earned from streaming sales and then calculates musicians’ royalties based on the remainder. Per the suit, this results in the artists being paid less than the amounts they are contractually owed.

The lawsuit says UMG has been able to conceal its conduct because international sales are reported only to the defendant’s wholly owned subsidiaries and are not included in the company’s accounting statements.

“As such, Plaintiff and Class Members have no way of knowing their royalties for international streams were based on reduced figures,” the lawsuit argues. “Other than undertaking a lengthy and expensive audit, which Plaintiff and Class Members had no reason to do because of Defendant’s concealment, Plaintiff and Class Members lack the ability to discern such facts.”

The lawsuit looks to cover anyone in the U.S., their agents, successors in interest, assigns, heirs, executors, trustees, and administrators who are or were parties to agreements with UMG and its predecessors and subsidiaries, whose music was streamed in a foreign country and are or were not accounted to or paid at source.

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