The British Phonographic Industry, representing the big music labels including EMI, Sony BMG, Universal and Time Warner, is trying to halve the royalties that songwriters can claim on each 79p digital download from 5p to 2.5p.
But yesterday the Music Alliance - a joint body representing some 44,000 songwriters and composers through the Performing Rights Society and the Mechanical Copyright Protection Society - lodged a counter-claim, demanding an increase in royalties to between 7p and 9p per download and challenging the record companies to divulge how much money they are now making from the online music market.
Although only a fraction of the market at present, digital downloading is forecast to grow into a multibillion-pound industry. The Music Alliance says that if the BPI succeeds in its case, then its members will receive 40p to 50p from every digital download, whereas songwriters and composers will get less than a tenth of that.
The BPI has been joined in the action by seven big digital downloaders including AOL, iTunes and Napster as well as the four mobile operators, Orange, T-Mobile, Vodafone and O2 which also take a cut from digital downloads.
The case is due to be heard before the UK Copyright Tribunal next autumn. Adam Singer, the former chief executive of Telewest who now heads the Music Alliance, said: "We have now submitted our reasons for why the record industry should adopt fresh economic thinking in a digital age to sustain the composing community upon which they rely."