Merlin Announces New Board Members, Labels
Merlin Announces New Board Members, Labels

Independent rights group Merlin has reached an out-of-court settlement with LimeWire, the P2P file-sharing company that was shut down by a federal court in October 2010 due to a "massive scale of infringement."

The amount of the settlement is not being disclosed, but Merlin CEO Charles Caldas tells it is commensurate with the major labels LimeWire settlement last year given its members' market share in the U.S. and the costs it incurred to reach the settlement. The actual figure is probably somewhere between $5 million and $15 million. The majors' settled with LimeWire for $105 million and enjoy roughly 70% of the U.S. recorded music market. Merlin claims its members have a 10% share. If Merlin and the major labels received an equal amount of money given their shares of the market, Merlin's settlement would be $15 million.

But the size of the settlement was also a factor of the costs of reaching the settlement. While the majors spent five years and spent considerable money to reach a deal with LimeWire, Merlin's legal action concluded in less than a year. Merlin was seeking at least $5 million when it sued last July.

The settlement will be distributed to Merlin in a way that reflects a member's share of actual usage of the service, says Caldas. Calculations will be performed by "a commercially engaged third party" such as a major accounting firm.

The deal marks the first time independent rights owners have participated in a settlement with a P2P company. Merlin, which represents independents ranging from Epitaph to Koch/E1, had previously reached settlements with other companies -- XM Satellite Radio in 2011, Grooveshark in 2010 and "a couple others" that remain confidential, Caldas says.

The settlement was "an unprecedented moment for independents," Charlie Lexton, Merlin head of business affairs and general counsel, said in a statement. "Whilst this is by no means the first settlement Merlin has delivered its members, it is clearly the most significant, representing as it does, the successful conclusion of a high profile, large scale, global copyright infringement claim on an equal footing with the major labels. An unprecedented moment for independents."

Its settlement with LimeWire is the very type of action that helped spur the creation of Merlin, Caldas says. The major labels' $115 million settlement with Kazaa in 2006, hailed by the RIAA and IFPI as a victory for the entire music industry, left independents with "ill-feeling and resentment," he says. So rather than let the majors' efforts against copyright infringement speak for the entire industry, Merlin was created so independents could better control their own destinies.

"We can't sit back and watch LimeWire pay the majors $100 million and do nothing about it," Caldas says.