In a case that could seismically alter the way labels and artists share download revenue, members of the Allman Brothers Band and Cheap Trick have filed a class action lawsuit alleging that Sony BMG h

In a case that could seismically alter the way labels and artists share download revenue, members of the Allman Brothers Band and Cheap Trick have filed a class action lawsuit alleging that Sony BMG has underpaid artists for digital music transactions.

At issue in the action, filed April 27 in U.S. District Court in New York by Labaton Sucharow & Rudoff and Probstein & Weiner, is whether the label's deal with online services for downloads is a license or a sale.

Sony BMG labels consider that their deals with the services are for sales of records rather than licenses for the recordings. But the suit alleges that Sony BMG is violating contractual obligations to share 50% of the net licensing revenue from digital music transactions with artists.

The two bands claim that from 99-cent downloads, they receive only about 4.5 cents, rather than the 30 cents per track they believe they are owed.

For years, artists have complained that royalties are further cut; many contracts permit a 50% reduction in royalties for music sold through a new technology, as well as a packaging deduction. Many artists say these clauses only made sense in the physical world, when music migrated to CDs from cassettes. Sony BMG declined comment.

"This has been the elephant in the room for a while," says Dave Frey, manager for Cheap Trick. "If you don't dispute the accounting now, that establishes how it's going to be in the future."

The suit, which still has to be certified in federal court as a class action case, follows a similar suit filed by Tom Waits' Third Story Music against Warner Music Group.

Other labels may soon be involved, as well. "I'm surprised that similar actions haven't already been commenced against the other record labels," says Brian Caplan, one of the attorneys bringing the suit.

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