In a typical recording agreement, an artist is usually paid half of the net profits earned from licensing a master recording to a third party. For example, if a third party were to use a recording in a movie, it would be granted a license to use the master, and the license fee received by the label would be split with the artist.

In contrast, an artist typically receives anywhere from 9 - 12 percent of the net profit earned by the label from the sale of a master through a third party.

So as you can imagine, how a transaction is characterized can have a dramatic effect on an artist's bottom line. It should come as no surprise then that labels are pressed to characterize digital downloads, which are fast becoming the dominant way to purchase music, as sales rather than licenses.

Slim isn't the first or only artist engaged in these kinds of battles. Most contracts today recognize the changing music landscape, and are explicit regarding the royalty for digital downloads. However, several artist contracts executed prior to the advent of the digital revolution are silent regarding such royalties, and thus subject to attack.

Assuming, for example, a label gets about 30 cents for each 99 cent iTunes download, characterizing the income earned from the download as income received from a third party license would net an artist 15 cents per download. On the other hand, characterizing the download as sale would net an artist approximately 3.6 cents assuming a 12% royalty, per download.

For the sake of argument, a label can justify the reduced royalty paid to artists given the costs associated with the sales of physical product: manufacturing, packaging, warehousing costs, shipping, and the risk of returns of unsold product. However, digital downloads eliminate the bulk of these costs to the labels, and accordingly their justification for compensating artists at a reduced rate.

Let's hope justice and reason prevail.