Whoever wins the legal battle between Pandora and the world's biggest record labels over payments for songs released before February 15, 1972, could save tens of millions of dollars and fundamentally change how artists and labels generate revenue.
Pandora, the streaming service with more than 250 million users, stopped paying reps for artists such as the Beatles, Bob Dylan and Marvin Gaye for these recordings, prompting the labels to file suit over "massive and continuing unauthorized commercial exploitation" last week in New York court. "It's obvious they want to show disrespect for past artists and writers," says Steve Cropper, guitarist for Booker T. and the M.G.'s and author of numerous hits for Otis Redding, Sam and Dave and others. "They've got it all wrong.
"It's not all about me — there are a lot of writers prior to 1972 and artists alive today that still need income. That's what they've done all their lives," Cropper adds. "Just to come up and arbitrarily take that away — those people don't have the money to sue Pandora." (A spokesperson for Pandora clarified that the issue has to do with royalties on pre-1972 sound recordings, not publishing royalties, so songwriters of all eras get paid either way.)
All legal radio and streaming services must pay record labels whenever they broadcast a particular song, but Pandora is attempting to take advantage of a hole in federal copyright laws — they didn't officially cover recordings until after 1972. Sirius XM, too, decided to forego payments to artists for these songs, which led to lawsuits in New York, Florida and California by the Turtles' Flo & Eddie as well as the major record labels. Last fall, Sirius XM responded by calling the litigation "a form of lawsuit lottery in search of an elusive new state-law right that would radically overturn decades of settled practice."
The inconsistency in copyright law is what Cropper calls "an accounting nightmare." Steve Marks, general counsel for the Recording Industry Association of America, which represents the big record labels, says Pandora and Sirius XM will, for example, currently pay for Led Zeppelin's "Kashmir" (1975), but not "Immigrant Song" (1970): "These artists should be fairly compensated by a service like Pandora that's profiting from the use."
Pandora and Sirius XM provide most of the $656 million in performance royalties that SoundExchange, which works with the RIAA, collected last year, according to the New York Times. Pandora wouldn't comment, but released a statement that it's "confident in its legal position and looks forward to a quick resolution of this matter." Responds the RIAA's Marks: "They've made very clear that they intend not to pay. They've drawn a line and taken a position and unfortunately we saw litigation was really the only way to deal with it."
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