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Issue Date: Vol. 54, No. 5, May 2014, Posted On: 4/28/2014

Pandora Sued By Labels Over License Fees For Older Recordings

Nick Montano
TAGS: jukebox, Pandora, digital music, streaming music, record labels sue Pandora, music copyrights, common-law copyright protection, federal copyright protection, Sirius XM in California, Ben Sisario, Spotify

NEW YORK CITY -- Three major record labels and an independent allege that Pandora is playing older songs without licenses. Sony, Universal, Warner Music and ABKCO have filed a lawsuit in New York State Supreme Court in Manhattan accusing Pandora of violating the state’s common-law copyright protections by using recordings of older songs without permission.

The lawsuit by the record labels involves an oddity in copyright law that may exempt songs recorded before 1972 from the system. Audio recordings didn't begin falling under federal copyright protection until Feb. 15, 1972, and that detail has produced great confusion about whether royalties are owed for using music from The Beetles, Bob Dylan, Elvis Presley, James Brown and a wide range of artists by services like Pandora and Sirius XM.

The litigants argue that while federal copyright law does not cover older material, those songs are protected under common law by states. The lawsuit charges that artists and labels have been deprived of tens of millions of dollars every year by Pandora and other services.

The same labels suing Pandora in New York filed a similar suit against Sirius XM in California in 2013. The satellite service maintains that there is no state law that requires it, or the scores of other U.S. businesses that publicly perform music, to pay license fees for pre-1972 recordings. That case has not been heard yet, so there is no precedent for a music-licensing requirement covering older recordings under a particular state's law.

This current wave of lawsuits, The New York Times' Ben Sisario wrote, boils down to "a concerted effort by the music industry to establish what could be a major source of revenue in the future." | SEE STORY


Because Pandora and Sirius XM rely on the compulsory licensing provisions of the federal copyright law, record labels cannot forbid them or any service from using its copyrighted material as long as they meet the federally mandated payment for said uses, according to a Motley Fool report. On-demand services like Spotify are not likely to be affected by either lawsuit as they contract directly with music publishers in most cases and do not fall under the compulsory licensing rules.

Pandora and Sirius XM are the two most popular listening services, boasting more than 70 million regular users and some 26 million subscribers, respectively. Their contributions represent most of the $656 million in performance royalties that were collected in 2013 by SoundExchange, a nonprofit royalty organization that is an offshoot of the Recording Industry Association of America. Spotify claims to have more than 24 million users, of which over six million are paying subscribers.

In the coin-op digital jukebox space, royalties for all music recorded before 1972 are paid. Jukebox music providers AMI Entertainment and TouchTunes maintain several licensing agreements at different levels, which include the labels, publishers and performance rights organizations. AMI now pays a synchronization license for its music video content, which is separate from audio.

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