Music streaming platforms and the legal issues that come with them were the focus of two CLE panels during SXSW 2015. Leading attorneys from across the nation took the stage to address both fellow lawyers and industry professionals about the current situations.
During “Unhappy Together,” panelists Bob Donnelly, Steve Gordon, and Henry Gradstein delved into the intricate history of copyright laws—from protection against unauthorized public performance in 1897 and the formation of the American Society of Composers, Authors, and Publishers in 1914 to payola laws in the 1960s and the Digital Millennium Copyright Act of 1998.
They also focused on the copyright act in which Congress made sound recordings created post-1972 eligible for federal statutory copyright protection. That decision has been at the center of recent courtroom battles between artists and record companies and streaming services, such as Sirius and Pandora. As Gordon, an attorney with Steve Gordon Law in New York City, explained, an estimated 5 percent of the plays on Pandora and 15 percent of Sirius content fall into the pre-1972 recording category. The streaming companies have taken the position that they don’t have to pay for those sound recordings because they are not subject to federal law performance rights. And many artists are not happy about it.
According to panelists, there are currently six cases challenging Pandora and Sirius XM about royalties for pre-1972 sound recordings, four of which are brought by founding members of rock group the Turtles. Two cases have been won at the state level.
While Gordon said that the wins were unexpected because you have to look hard to find law supporting the artist rights, Gradstein, a partner in Gradstein & Marzano in Los Angeles, California, and the lead attorney in the class actions on behalf of the Turtles against Sirius XM and Pandora, disagreed, pointing to similar cases and noting that selling a record does not mean copyright laws are lost. “It’s just not right. It’s not fair. And it’s also not legal,” Gradstein said.
All panelists agreed that the ramifications of the trials could have a big impact on the industry.
“The essence of the […] cases is actually quite simple. The way the decisions were reached is actually quite complex,” said Donnelly, an attorney with Lommen Abdo in New York City who moderated the panel. “This is an incredibly important moment in time.”
Conversation continued in “Still Screaming about Streaming,” with John Simson, Kenneth Steinthal, Jay Rosenthal, and Brad Predergast focusing on the value of songwriters and recordings, as well as the debate surrounding the ongoing review of Consent Decrees by the Antitrust Division of the U.S. Department of Justice.
Specifically, the panelists talked about the potential to alter or dismantle current Consent Decrees, which began in 1941 to address competitive concerns from the market power of ASCAP and Broadcast Music Inc. acquired through the aggregation of public performance rights held by member songwriters and publishers. Although they have been modified since their entry, ASCAP, BMI, and some other firms in the music industry believe the decrees need to be adjusted again to account for changes in how music is delivered to listeners.
Rosenthal, a partner in Mitchell Silberberg in Washington, D.C., who has served as senior vice president and general counsel to the National Music Publishers’ Association, has hope that the review will lead to a reform of what he sees as an unfair rate structure. “We are now in a position where the value of music compositions are so low that songwriters are leaving and not being professional songwriters,” he said. “But there certainly is a consensus that we’ve got to change some things.” Ultimately, Rosenthal believes a free market system would be the fairest option. “I don’t see anything wrong with it. I think its good for everybody. And if it gets to the point of rectifying this 10 to one difference in the values of the music compositions to the sound recording rights, then do it. Let’s get back to the private market as quickly as we possibly can.”
But Steinthal, a partner in King & Spalding in San Francisco, California, who led the recent trial and related court proceedings on behalf of Pandora against ASCAP and BMI, said the disparity point Rosenthal cited is ironic and self-inflicted. “Publishers just rake in cash, they don’t invest,” Steinthal said. “Sound recording companies invest millions and millions of dollars in artists and everybody else. Therefore, you have to look at the sound recording performance in the broader context of our industry, which is fundamentally different than the publishing industry.”
Public comments regarding the Consent Decree review are available at justice.gov.