Pandora's $90 Million Settlement on Pre-1972 Performance Royalties Likely Has National Implications
Pandora’s $90 million settlement with the RIAA and five record labels to end the labels’ lawsuit over unpaid performance royalties on pre-1972 recordings will likely have national implications, though it doesn’t fully resolve the status of those recordings, industry lawyers and other stakeholders told us. Pandora’s settlement ends the labels’ lawsuit in New York (see 1404210027), though Pandora said the settlement “provides a nationwide resolution for Pandora’s use” of the labels’ pre-1972 recordings. Judges in California and New York had decided their states’ laws allowed performance royalties for pre-1972 recordings in the absence of a federal mandate.
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The Pandora settlement and a similar late June settlement from Sirius XM on pre-1972 recordings mean “an iconic generation of artists and the labels that supported them will be paid for the use of their creative works,” said RIAA CEO Cary Sherman in a Pandora statement. Sirius’ settlement with RIAA and record labels totaled $210 million (see 1506260048). Both the Sirius and Pandora settlements were with ABKCO Music, Capitol Records, Sony, Universal Music Group and Warner Music Group. The Pandora settlement “clears a major hurdle in allowing great legacy artists to receive some compensation for their invaluable contributions to our lives,” said Recording Academy Chief Industry, Government & Member Relations Officer Daryl Friedman in an email. “This is an important step for fair compensation for creators on streaming services, but not the last step.”
The Pandora settlement had been considered likely after the Sirius settlement, but it still means “people can exhale,” said Future of Music CEO Casey Rae. “Having tensions between the U.S.’ biggest webcaster and the music community on this issue isn’t productive.” The Pandora settlement covers only past performances of pre-1972 recordings, but it gives Pandora until the end of 2016 to reach licensing agreements with the labels. Pandora, like Sirius, appears to have decided to settle based entirely on a “cost-benefit” analysis of the legal landscape that showed they were likely to face similar lawsuits across the country, said Dina LaPolt of LaPolt Law, an IP and entertainment law firm.
The Sirius and the Pandora settlements both amount to “national settlements” that resolve their pre-1972 recording royalties issues beyond state courts, but they also affect similar lawsuits the two services face in federal courts, said music industry attorney Chris Castle. The settlements particularly “undercut” ongoing lawsuits against Sirius and Pandora brought by Flo & Eddie, who own the copyright to The Turtles' “Happy Together” and the rest of that band's music library, Castle said. “I’m sure that [Flo & Eddie's lawyers at Gradstein & Marzano] are going to be pissed off about this,” Castle said. The U.S. Court of Appeals for the 2nd Circuit is considering Sirius’ appeal of the U.S. District Court in New York’s decision in Flo & Eddie’s class-action lawsuit against the company, while the 9th Circuit is dealing with Pandora’s appeal of the U.S. District Court in Los Angeles’ decision in Flo & Eddie’s case there. Both District Court decisions relied on an interpretation that state laws allowed performance royalties on pre-1972 recordings. Gradstein & Marzano didn’t comment.
The music industry is likely to closely follow how the record labels distribute the $90 million from the Pandora settlement, LaPolt and Rae said separately. A Warner spokesman said the company “will treat the proceeds of this settlement like any other payment from Pandora, with the artist share being distributed through SoundExchange.” SoundExchange believes the Pandora settlement “is a good start, which we hope encourages all services -- including Pandora -- to pay for all pre-72 recordings across all of their programming,” CEO Michael Huppe said in a statement. Recording artists are likely to push for the other labels in the settlement to also distribute their share of the $90 million via SoundExchange since “we don’t want the labels touching that money,” LaPolt said. It should be relatively easy to determine how much each artist should get paid out of the settlement funds because Pandora kept good records of how much each song was streamed, Rae said. “It’s important to me that these guys get paid,” he said.