Sirius XM Settles Record Labels' Lawsuit on Pre-1972 Recordings Royalties for $210 Million
Sirius XM’s disclosure Friday that it had a $210 million settlement with multiple record labels to settle the labels’ lawsuit over unpaid royalties for pre-1972 sound recordings is likely to accelerate a push for Sirius and other digital streaming services to settle similar lawsuits, industry officials told us. Sirius said in an SEC filing posted on its website Friday that it reached the settlement June 17 with ABKCO Music & Records, Capitol Records, Sony Music Entertainment, UMG Recordings and Warner Music Group to end the labels’ joint lawsuit in Los Angeles County Superior Court. The settlement, to be paid out by July 15, resolves all royalty issues with the labels through the end of 2017. Sirius said it also has the option for an additional license with the record labels through 2022. Royalty rates for additional performance licenses “will be determined by negotiation or, if the parties are unable to agree, binding arbitration,” Sirius said in the filing.
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Sirius’ decision to settle the record labels’ lawsuit isn’t surprising given Sirius’ recent setbacks in lawsuits over pre-1972 sound recording royalties brought by music duo Flo & Eddie, who own the copyright to The Turtles’ “Happy Together” and the rest of that band’s music library, said Future of Music Coalition CEO Casey Rae. Flo & Eddie have sought class-action lawsuits in U.S. district courts in Los Angeles (see 1505280062), New York (see 1501160053) and Miami. The Sirius settlement of the record labels’ lawsuit was likely “inevitable because they were going to lose the war,” said Dina LaPolt of LaPolt Law, an IP and entertainment law firm. “There’s no way that they could win in all these different states under their respective copyright laws. If they didn’t come out and do something like this, they faced an uphill battle.” A Sirius spokesman didn’t comment on whether it’s pursuing a settlement of the Flo & Eddie lawsuits.
The record labels’ settlement of their lawsuit against Sirius likely has implications for the Flo & Eddie lawsuits, particularly if Sirius decides to pursue a settlement in that case, said music industry attorney Chris Castle. “I would imagine that Sirius will try to offset whatever they will pay to [Flo & Eddie] by what they pay to the labels,” he said. Sony and the other record labels that settled their lawsuit claimed they owned or otherwise controlled the rights to 80 percent of the pre-1972 recordings that Sirius was streaming, so they could justify paying a lesser amount to Flo & Eddie, Castle said. It’s also likely that Sony and the other record labels that settled with Sirius will opt out of the Flo & Eddie class-action case, Castle said.
Flo & Eddie’s cases in Los Angeles and New York have been going well for the plaintiffs, but U.S. District Judge Darrin Gayles ruled in Miami last week in favor of Sirius’ motion for a summary judgment of the Flo & Eddie lawsuit there. Federal judges in Los Angeles and New York have rejected similar motions, but “Florida is different,” Gayles wrote in his ruling. “There is no specific Florida legislation covering sound recording property rights, nor is there a bevy of case law interpreting common law copyright related to the arts.” Lead Flo & Eddie counsel Harvey Geller of Gradstein Marzano didn’t comment.
It’s still “an open question” how Sony and the other record labels will use their portions of Sirius’ $210 million and what percentage of that settlement will go to the recording artists affected by the ruling, Rae said. The settlement is obviously a “considerable sum,” but “we’d like more detail on how they plan to apportion” the settlement funding, he said. “We have questions about whether the labels have a mechanism to account for this bounty.” The “fair thing to happen here would be for the money to get paid to SoundExchange,” which would then distribute the money to individual recording artists, Castle said. The labels and SoundExchange didn’t comment.