In a ruling issued on Tuesday, a New York federal judge threw out the authors claim that Harlequin had used a corporate sleight-of-hand to pay them 3-4 percent of ebook royalties instead of the 50 percent they believed they were due.

The case, which turned on technical questions of law, is an example of the collisions that can arise as a result of book contracts signed in an age that pre-dated the current boom in ebooks. (In another case in the same court, parties are squawking over whether an author signed to a 1971 contract can shop ebook rights to another publisher.)

In the Harlequin case, the authors pointed to publishing contracts that granted them 50 percent of the digital royalties that the publisher collected. The authors believe this should let them collect half of the $4 Harlequin earned from an ebook with a cover price of $8.

Harlequin instead decided to pay 3-4 percent ($0.24 to $0.32 on an $8 book) on the grounds that this was half of the 6-8 percent it received from licensing the rights to a different publisher. The issue became contentious because the third party publishers in this case were subsidiaries created by Harlequin for tax purposes.

In a related letter to authors, Harlequin explained that, prior to 2005, no one had foreseen the growth of ebooks and that it was reasonable to pay authors less than 50 percent.

In a four-page decision, the New York court declined to consider the authors’ arguments that the “third party publishers” were alter-egos for Harlequin. Instead, the court relied on a narrow interpretation of contract law to dismiss the claim.

The decision is very brief and contains an unusual footnote stating that the judge’s clerk, a second-year law student, had largely researched and drafted the opinion (clerks often help with such tasks but judges rarely acknowledge this).

The authors’ counsel included veteran publishing lawyer David Wolf. Reached by phone, Wolf declined to comment and said his clients were considering their options. You can read the ruling for yourself here:

Harlequin Dismissal

That plan would, for example, harmonise the currently fractured entertainment licensing regimes to ensure online services can offer music, TV and more across national borders.

But do Europeans really want to get digital content from other member states? Research conducted for the EC and released this week is instructive for services thinking of benefitting from the single market, showing:

• Nineteen percent of Europeans are interested in receiving content from another EU country.
• That is only two percent more than the 17 percent of consumers who already do so, primarily by TV.
• Only three percent of citizens polled by TNS Opinion & Social said they were interested in receiving VOD from across European borders.

These figures do not suggest massive pent-up cross-border demand for online content services that want to upturn traditional licensing structures and smash through national boundaries. But, as is often the case, perhaps potential consumers don’t know what they really want until it is truly on offer.

Photo: Shutterstock / Silver Tiger

The prospect of a single market is nevertheless great news for Europe’s content production powerhouses. The UK is the country from which most interested citizens (42 percent) want foreign content, followed by Germany and France.

And, of those who are interested in getting content from outside their home nation, 31 percent say they are prepared to pay for it — 14 percent by subscription and 17 percent by pay-per-view or per-listen.

But the numbers of Europeans who want to consume content from elsewhere in Europe is broadly similar to the proportion who want it from outside Europe, too. Sixteen percent said they wanted to do so (12 percent for TV programmes, three percent for VOD and one percent for other), with U.S. content by far the most desirable.

And people are more prepared to pay for this non-EU content than for that from elsewhere in Europe – 19 percent via subscription, 21 percent via pay-per-view or per-listen.

The biggest reason for the findings is linguistic. Citizens may not desire TV shows or music from neighbouring countries since they are in different languages, but many are attracted to English-language content.

One positive outlook is that younger, more up-market consumers are more inclined to want cross-border content.

UK royalty collector PRS For Music reports British songwriters and composers collectively earned £187.7 million ($301 million) in 2011 from plays of their songs outside the UK.

That total was 10.6 percent more than in 2010. But it contains downloads and streaming royalties of a tiny £2 million ($3.2 million).

That is miniscule, perhaps scandalous. Domestically, last year’s digital royalties totaled £38.5 million ($61.7 million) – yet British musicians are consumed heavily in the rest of the world.

In fact, British music has rarely been so popular overseas, with acts like Adele and One Direction proving to be successful in the United States, for example.

What’s to blame for the discrepancy? A PRS For Music spokesperson tells paidContent:

“In the US, there is no performing right in downloads, so any revenue from these types of services would come direct from publishers.

“Similarly, streaming rates are low and you have to have many plays to see big money.”

And things aren’t looking up either. PRS For Music’s best optimistic spin, in Friday’s announcement, is that “the figures look set to more than double by 2022″…

Big deal. At that rate, in a whole decade’s time, all of Britain’s musicians would be earning a total of just £4 million per year in performance and mechanical royalties from digital services.

By far the healthier bulk of musicians’ royalty income will continue to come from analogue music – yet consumption is rapidly moving to the digital formats which pay them less.

The settlement comes a year after rapper Eminem won a court case that concluded that music downloads from iTunes are licenses, not sales. The distinction matters because, in the case of licenses, labels have to give artists 50 percent of revenues and not the 12-20 percent rate artists receive from CD sales.

Under the terms of the settlement, Sony (NYSE: SNE) will set aside $7.65 million to be divided among artists whose songs were downloaded more than 28,500 times. Lawyers fees and related auditing expenses will be deducted from the amount.

The deal also calls for a smaller pot of $300,000, with no fees deducted, to be divided among artists whose songs were downloaded fewer than 28,500 times.

In some cases, bands will be eligible for an additional 3 percent in royalties for downloads after January 1, 2011.

The settlement grows out a class action filed in 2007 by the Youngbloods on behalf of other bands who argued that imposing CD-style rules in the digital era was unfair. The deal, which is the result of a five-year legal meat grinder, also covers a parallel class action involving the Allman Brothers and Cheap Trick.

A copy of the proposed settlement is below.

Young Bloods Sony Settlement