1:05pm PT by Eriq Gardner
Pandora Agrees to $90 Million Deal to End Pre-'72 Lawsuit by Major Labels
The Recording Industry Association of America has announced that its members have come to a $90 million settlement to end litigation over Pandora's use of sound recordings authored before 1972.
The deal marks the latest turn in a battle that has upset decades of practice on the use of older recordings. In this lawsuit, Capitol Records, Sony, Universal Music Group, Warner Music Group and ABKCO Music alleged that the digital broadcaster Pandora had violated New York state law by publicly performing recordings that were created before such works fell under federal copyright law.
In the past, major record labels haven't seen direct compensation for works performed on terrestrial radio and have only had a limited public performance right for digital sound recordings. But an opening occurred in late 2014 when judges in California and New York determined that their state laws protected the performance of pre-1972 recordings.
The $90 million deal for Pandora comes amid a contentious discovery battle where Pandora was seeking the labels' contracts with recording artists. One of the issues being explored was whether artists expected to receive money from the public performances of their recordings.
The announcement also arrives a few months after the RIAA reached a $210 million settlement with SiriusXM.
Pandora still faces a proposed class-action lawsuit led by Flo & Eddie of The Turtles, which is now before the 9th Circuit Court of Appeals for review.
Other broadcasters including CBS Radio, iHeartMedia and Cumulus — the nation's three largest terrestrial radio station operators — are also facing legal action on the pre-1972 front and have been putting up eye-opening challenges that could have ramifications even beyond public performance. For example, on Tuesday, CBS Radio made an argument that it only performs digital remasters created after 1972, not the original vinyl versions. The argument could impact issues like termination rights.
In the meantime, the RIAA is celebrating its newest deal with Pandora.
“Major settlements with SiriusXM and now Pandora means that an iconic generation of artists and the labels that supported them will be paid for the use of their creative works,” said RIAA Chairman and CEO Cary Sherman in a statement.
The deal is confidential, but could create further issues. For example, will the proceeds of the settlement be shared by the major labels with their recording artists? What share? Upon a request for comment, an RIAA spokesperson said it was a question best directed toward the labels themselves. We've reached out. According to a Sony insider, the label intends to share proceeds in the standard way, analogous to how money from SoundExchange is shared. The source acknowledges that the mechanism is still being worked out. Another source says that Universal intends to process money directly through SoundExchange, a digital royalty collection outfit. A Warner Music spokesperson says the "the artist share [is] being distributed through SoundExchange."
Before the case settled, Pandora wanted to see artists contracts and argued to the judge, "If New York law provided a right of public performance, and if it were unfair to perform recordings without payments to artists, surely one would see a provision for performance royalties in all recording contracts."
Attorneys for the plaintiffs argued the only relevant issue was payment to artists and pointed to testimony from the chief executive of ABKCO, owner of sounds recordings from The Rolling Stones, that it ensures that all of its recording artists are paid for digital streaming revenue, irrespective of the specific language in their contracts. Pandora interpreted this to mean that at least some payments are made "voluntarily."