Pandora to pay $90 million in settling royalties lawsuit over pre-1972 recordings

24 Oct 2015 | Author: | No comments yet »

Pandora Coughs Up $90M to License Older Songs.

Pandora Media Inc. plummeted the most since going public in June 2011 after issuing a sales forecast that fell short of analysts’ estimates and recording charges of $81.8 million to settle legal disputes with the music industry. The labels – ABKCO Music & Records, Capitol Records, Sony Music Entertainment, UMG Recordings and Warner Music Group – were represented by the Record Industry Association of America, and argued that Pandora was violating copyright laws in not paying royalties on music that was more than 43 years old.

In a bit of a tricky situation for streaming services, federal copyright law applies only to songs created after 1972, but some state laws apply to pre-1972 tunes. The Internet radio company is facing stiff competition from Spotify Ltd. and Apple Inc. while battling record labels and music publishers over how much it pays to play their songs. Due to a U.S. copyright loophole, Pandora has played these songs without compensating Warner, Sony, Universal and other labels that own the rights to the master recordings in recent years. Sales this quarter will be $325 million to $330 million, Pandora reported Thursday, less than the $351.5 million average of estimates compiled by Bloomberg. “We now see competitive actions sapping growth from Pandora’s model, as the ‘cost of admission’ to direct talks with labels is getting pricey,” analysts at Piper Jaffray Cos., who downgraded the stock to neutral, wrote in a note Friday. Pandora’s policy prompted a backlash among classic artists — Buddy Holly’s estate had called non-payments by Pandora and SiriusXM an “injustice,” and Stax soul guitarist Steve Cropper, who appeared on numerous Otis Redding and Sam and Dave hits, complained to Rolling Stone last year: “I’m part of a catalog of music from the Sixties that got re-released in the Seventies and Eighties, and some today, so I still get an income.

Brian McAndrews, Pandora’s CEO, said that the music streaming site was “excited to have found a resolution” with the record labels that filed their suit in April 2014. But they just keep chipping away and chipping away.” The Recording Industry Association, which represents the major labels, sued Pandora over the non-payments last year — shortly after Flo and Eddie of the Turtles filed suit on similar grounds.

For the years beyond that, the streaming service will have to work out future deals with the labels, with whom McAndrews said Pandora hopes to “continue to foster a better, collaborative relationship”. The complaint said the music in question included some of the most legendary artists including the Beatles, the Rolling Stones, the Grateful Dead, Bob Dylan and Elvis Presley.

We appreciate the collaborative and constructive approach of Pandora’s team in resolving this longstanding issue for artists and labels.” The RIAA sued SiriusXM in 2013. The thought, at the time, was that such a large payout would encourage record companies to pursue similar settlements with other services—which seems to have panned out. Mad Max will roar back out of the apocalypse while Mad Men rides off into the sunset, rock’s Antichrist Superstar and hip-hop’s Yeezus will rise again. According to the RIAA chairman and CEO, Cary Sherman, both settlements ensure “that an iconic generation of artists and the labels that supported them will be paid for the use of their creative works”.

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