Pandora hit with label lawsuit over royalties

riaa vs pandora 525w

The world’s biggest record label groups have filed a lawsuit against Pandora in an attempt to recoup royalties for music recorded before 1972, which is not protected by U.S. copyright law. The litigation follows up a lawsuit brought in September against SiriusXM over the same issue. Sony, Universal, and Warner Music are joined ABKCO in the action against Pandora.

The legal question hinges on the U.S. Copyright Act, which protects sound recordings made after February 15, 1972, leaving earlier recordings unprotected. Non-interactive music services like Pandora (and SiriusXM) are permitted to play pre-1972 recordings without paying record labels or performers. For music recorded after the cutoff, Pandora pays government-regulated royalties that add up to about half of Pandora’s business revenue. (On-demand music services like Spotify operate under different licensing regulations, wherein they negotiate directly with labels for every recording used.)

“Just because [pre-1972 artists] recorded songs before 1972 doesn’t mean their songs have no value. These companies’ failure to pay the rock ‘n’ roll pioneers is an injustice and it needs to change.” –RIAA, published statement

Because federal regulations allow free use of pre-1972 music without a performance royalty, the suit is filed in New York State’s supreme court, seeking recourse under that state’s common-law copyright. In a related 2005 case, a New York State appellate court favored Capitol Records in a complaint against Naxos of America, a record label that was re-releasing pre-1972 classical recordings without permission.

In our Pandora testing, creating an online radio station for The Beatles (whose final original album came out in 1970) started off with a Beatles song, then spawned a playlist of Beatles cover songs (performed by original band members and others) and other pre-1972 material by Simon & Garfunkel and others.

In iTunes Radio, the experience was similar — first a Beatles song, then other early material. Apple acquired the Beatles catalog to sell its songs as downloads in 2010. That agreement might have been extended to cover use of those recordings in iTunes Radio. iHeartRadio offers a “24/7 Beatles” station, in which every track we heard was pre-1972. The performance rights for those songs might have been negotiated directly.

Any music service which takes advantage of the pre-1972 loophole of the U.S. Copyright Act will be watching the Pandora case in New York closely.

Brad Hill