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The U.S. District Court for the Central District of California decided that the “net receipts” Aftermath Records owes rapper Eminem's early producers ' for the licensing of the artist's sound recordings for permanent digital downloads and ringtone masters ' are to be calculated after the label deducts its mechanical royalty costs for use of the underlying songs and its recording distribution fees. But the district court further found Aftermath's owners couldn't deduct “new medium” and “container” charges when it comes to digital music sales. F.B.T. Productions LLC v. Aftermath Records, 07-3314.

The case had been remanded to the district court by the U.S. Court of Appeals for the Ninth Circuit, which found that Aftermath and its joint venture owners, Interscope Records, UMG Recordings and ARY Inc., owed the producers 50% of label income earned from the Eminem recordings under a “Masters Licensed” recording agreement clause, rather than a 12% to 20% royalty rate under a “Records Sold” provision. District Judge Philip S. Gutierrez then noted in part: “Plaintiffs argue that testimony and exhibits introduced at trial show that Aftermath does not deduct mechanical royalties or distribution fees from the licensing income received from conditional downloads and streams. ' Plaintiffs' conclusion does not follow from the evidence. The reason Aftermath does not deduct mechanical royalties or distribution fees from income received from licensing conditional downloads and streams is because Aftermath does not pay those costs for licensing conditional downloads and streams.”