It looks like being a mixed week for Dr. Dre, after the veteran hip hop artist lost out on a $3 million royalty claim over his first album, but stands to gain a massive windfall from the rumored purchase of Beats Electronics by Apple.
Of Copyright and Oral Contracts
The royalty news dates back to Dre’s early recording career with the now infamous Death Row Records, which he co-founded. The label and its catalog, including aforementioned debut “The Chronic,” have changed hands several times in the last decade. Regardless of its owner, the label is reported to have an oral agreement with Dr. Dre that should essentially prevent it from capitalizing on the popular album by any new forms of distribution, including digital downloads.
Dre’s claim that this agreement was breached between 2006-’09, when the re-imagined WIDEawake Death Row Entertainment allegedly grossed more than $3 million in digital sales, was struck down by the presiding judge.
Demonstrating the complexity of the music royalties system and the importance of a written contract, the judge cited lack of detailed data and ambiguity over the oral agreement as reasons for denying Dre’s claim to those sales. The owners of Death Row rammed this point home in a statement on the case, saying:
“[He] cannot explain his alleged oral contract, and it appears he has transferred away his contractual rights and copyright rights.”
Music Revenue in the Hands of the Tech Sector
That lost revenue will be chump change to the musician, though, if the expected $3.2 billion deal for Apple to buy Beats Electronics goes through. Dre has a reported 20% stake in the business and a big branding stake on the fashionable headphones it sells, placing him in an enviable position to others in the entrepreneurial world of hip hop.
The deal also shows the shifting sands for musicians and revenue. As physical record sales have fallen away and digital downloads show signs of doing the same (perhaps the fuel for that grab at past royalties), artists are facing up to an uncertain future in terms of making money. The technology sector looms large over entertainment as both a destroyer and potential savior, as online piracy denies sales revenue but global brands like Apple and Amazon lend their weight to distribution models that bring in money from fans.
The potential for Apple to reinvent Beats Music – and reinvigorate the streaming music space in doing so – might be just what musicians need to send such services mainstream. Streaming revenues are still a drop in the ocean for musicians at the moment, but hitting critical mass of subscribers could see that change rapidly. Apple has both the reach and resources to make this happen, while the likes of the Beats brand, Dre and music mogul Jimmy Iovine have the influence to make any offering more attractive to listeners.
The music industry stands at an intriguing crossroads in terms of its business model. If experienced heads like Dr. Dre and Iovine are to be at the wheel, it’s likely that artists will feel all the more comfortable with the direction they take.