1 00:00:00,000 --> 00:00:03,080 Speaker 1: Bloomberg Laws brought to you by Sector Spider e t FS. 2 00:00:03,120 --> 00:00:05,160 Speaker 1: Why by a single stock when you can invest in 3 00:00:05,160 --> 00:00:09,360 Speaker 1: the entire sector. Visits Sector sp drs dot com or 4 00:00:09,440 --> 00:00:13,039 Speaker 1: call one eight six six Sector e t F. The 5 00:00:13,080 --> 00:00:16,959 Speaker 1: battle over royalties for pre nineteen seventy two sound recordings 6 00:00:16,960 --> 00:00:20,800 Speaker 1: between digital music companies and the owners of recordings feels 7 00:00:20,800 --> 00:00:23,400 Speaker 1: like it's been going on since the seventies. It's hard 8 00:00:23,440 --> 00:00:26,160 Speaker 1: to keep track of the settlements and court cases across 9 00:00:26,200 --> 00:00:29,720 Speaker 1: the country in different states with different copyright laws. You 10 00:00:29,760 --> 00:00:32,440 Speaker 1: may have heard that the sixties banned the Turtles settled 11 00:00:32,479 --> 00:00:35,800 Speaker 1: with Serious x M in California in a case covering 12 00:00:35,880 --> 00:00:38,960 Speaker 1: class action claims on behalf of other performers, But a 13 00:00:39,000 --> 00:00:41,400 Speaker 1: New York appeals Court decision may throw a ranch into 14 00:00:41,440 --> 00:00:44,760 Speaker 1: that settlement. New York's highest court decided that a common 15 00:00:44,840 --> 00:00:48,560 Speaker 1: law copyright for pre nineteen seventy two sound recordings does 16 00:00:48,600 --> 00:00:51,680 Speaker 1: not exist in New York State, and so no royalties 17 00:00:51,680 --> 00:00:55,319 Speaker 1: are owned the state. Will other courts follow and will 18 00:00:56,320 --> 00:00:59,440 Speaker 1: be the year that Serious and Pandora put this issue 19 00:00:59,480 --> 00:01:03,560 Speaker 1: of royal t s behind them. Joining me are Matthew shettle, Helm, 20 00:01:03,640 --> 00:01:08,400 Speaker 1: litigation analyst for Bloomberg Intelligence and June Bessic, executive director 21 00:01:08,440 --> 00:01:11,319 Speaker 1: of the Kurnikans Center for Law, Media and Arts at 22 00:01:11,360 --> 00:01:15,919 Speaker 1: Columbia University. Matt. This is a confusing, even messy area 23 00:01:15,959 --> 00:01:19,200 Speaker 1: of law. I might say, explain what the issue is 24 00:01:19,360 --> 00:01:23,240 Speaker 1: with the pre nineteen seventy two recordings, sure, Sure, June. 25 00:01:23,280 --> 00:01:25,959 Speaker 1: So the issue comes up every time you listen to 26 00:01:26,000 --> 00:01:30,840 Speaker 1: a song over Serious Radio or over Pandora. UH. And 27 00:01:30,840 --> 00:01:34,880 Speaker 1: and due to a technicality in how the laws have 28 00:01:34,880 --> 00:01:39,640 Speaker 1: have developed, UH, those services don't have to pay the 29 00:01:39,680 --> 00:01:43,560 Speaker 1: recording owners of the owners of those songs. And so 30 00:01:44,080 --> 00:01:48,640 Speaker 1: that spawned litigation driven by class action lawyers representing, as 31 00:01:48,680 --> 00:01:52,160 Speaker 1: you said, driven by by Flow and Eddie, members of 32 00:01:52,200 --> 00:01:56,040 Speaker 1: the Turtles the sixties Ban the Turtles that brought these 33 00:01:56,160 --> 00:02:01,240 Speaker 1: these class action lawsuits against UH, the Dora and Serious. 34 00:02:01,520 --> 00:02:05,000 Speaker 1: And they actually had some success initially in early suits 35 00:02:05,040 --> 00:02:07,920 Speaker 1: saying hey, this is our property. You're making millions of 36 00:02:07,960 --> 00:02:11,640 Speaker 1: dollars playing our recordings and we're getting none of it. 37 00:02:12,240 --> 00:02:15,679 Speaker 1: And and they they they started there, as I said, 38 00:02:15,720 --> 00:02:18,280 Speaker 1: their their fight here with with two early winds in 39 00:02:18,360 --> 00:02:23,960 Speaker 1: district courts UM in New York and California and June, 40 00:02:24,520 --> 00:02:28,960 Speaker 1: there have been settlements. But court cases are continuing in 41 00:02:29,080 --> 00:02:31,720 Speaker 1: some of the states where there are settlements. What's happening? 42 00:02:31,720 --> 00:02:34,919 Speaker 1: What kind of settlements are these? Well, to some degree, 43 00:02:35,120 --> 00:02:40,800 Speaker 1: the settlements are to minimize the amount of uh royal 44 00:02:40,840 --> 00:02:44,040 Speaker 1: chiefs that people would have their their their protection for 45 00:02:44,240 --> 00:02:48,000 Speaker 1: serious and pandora. But the amounts of paident settlement can 46 00:02:48,040 --> 00:02:51,600 Speaker 1: be reduced if, in fact it turns out that different 47 00:02:51,639 --> 00:02:55,919 Speaker 1: courts say that they aren't liable and so, Matt, what 48 00:02:56,000 --> 00:02:59,920 Speaker 1: was the reasoning of the New York Appeals Court? So 49 00:03:00,000 --> 00:03:02,760 Speaker 1: of the New York Court looked at this and said, 50 00:03:03,240 --> 00:03:07,119 Speaker 1: you know, as sympathetic of of a case as as 51 00:03:07,200 --> 00:03:09,720 Speaker 1: Flow and Eddie may have that, hey, maybe we should 52 00:03:09,720 --> 00:03:12,200 Speaker 1: be we should be paid for this. When you actually 53 00:03:12,240 --> 00:03:14,920 Speaker 1: look at the law and the history of of the 54 00:03:14,960 --> 00:03:19,040 Speaker 1: copyright law here, there's a long history of of of 55 00:03:19,160 --> 00:03:24,440 Speaker 1: not paying um recording owners for performances and and so 56 00:03:24,480 --> 00:03:27,519 Speaker 1: they basically what the New York New York's highest court 57 00:03:27,600 --> 00:03:30,280 Speaker 1: said was, as much as we might like to rule 58 00:03:30,360 --> 00:03:33,200 Speaker 1: for you because it's the right thing, that's not our 59 00:03:33,280 --> 00:03:35,120 Speaker 1: job or a court, and we have to look to 60 00:03:35,200 --> 00:03:38,600 Speaker 1: the existing law and your remedy if you really want 61 00:03:38,600 --> 00:03:42,360 Speaker 1: to fix it's with the legislature to clarify that you 62 00:03:42,360 --> 00:03:45,120 Speaker 1: should be paid going forward. We can't do that as 63 00:03:45,160 --> 00:03:48,320 Speaker 1: a court. June, Will you go back and just explain 64 00:03:49,080 --> 00:03:52,920 Speaker 1: why pre nineteen seventy two is different from post nineteen 65 00:03:53,040 --> 00:03:56,920 Speaker 1: seventy two, and also why serious and x M are 66 00:03:57,000 --> 00:04:02,360 Speaker 1: different from terrestrial stations. Okay, Well, nineteen seventy two are 67 00:04:02,360 --> 00:04:05,720 Speaker 1: on different footing because until nineteen seventy two, there was 68 00:04:05,800 --> 00:04:10,120 Speaker 1: no federal copyright protection for sound recordings. It only started 69 00:04:10,120 --> 00:04:12,680 Speaker 1: in February of seventy two, and it only goes forward. 70 00:04:12,720 --> 00:04:17,240 Speaker 1: So anything that was created before uh that date, um 71 00:04:17,480 --> 00:04:21,200 Speaker 1: is only protected by state law, and state laws differ 72 00:04:21,360 --> 00:04:24,440 Speaker 1: from state to state. Sometimes the state laws that protect 73 00:04:24,480 --> 00:04:29,039 Speaker 1: the sound recordings are statute. Sometimes they're um just uh 74 00:04:29,080 --> 00:04:33,880 Speaker 1: you know, judge made law, UM. And so under federal law, 75 00:04:34,320 --> 00:04:39,279 Speaker 1: over time there became protection for certain aspects of performing right, 76 00:04:39,800 --> 00:04:44,440 Speaker 1: but the state laws really never updated uh their laws, 77 00:04:44,480 --> 00:04:46,680 Speaker 1: and so they're where they were before. But the reason 78 00:04:46,720 --> 00:04:50,359 Speaker 1: why this is so important is that, uh, the the 79 00:04:50,400 --> 00:04:54,320 Speaker 1: way that people exploit recordings has changed for a long time. 80 00:04:54,400 --> 00:04:57,440 Speaker 1: There we only exploited them by making copies and selling them, 81 00:04:57,680 --> 00:05:00,080 Speaker 1: and that was protected under state law. But only in 82 00:05:00,120 --> 00:05:03,520 Speaker 1: the last few years has streaming and public performance become 83 00:05:03,520 --> 00:05:06,120 Speaker 1: a principal means of exploiting these sound recordings. And that's 84 00:05:06,120 --> 00:05:10,240 Speaker 1: where the money is now. Matt. There are cases in 85 00:05:10,279 --> 00:05:14,040 Speaker 1: other states and they don't have to follow New York's reasoning, 86 00:05:14,320 --> 00:05:17,800 Speaker 1: But is there a good reason that they might. I 87 00:05:18,200 --> 00:05:20,640 Speaker 1: think there is, and and as you said, so we 88 00:05:20,680 --> 00:05:23,400 Speaker 1: we've had the New York High Court rule here, there 89 00:05:23,400 --> 00:05:26,400 Speaker 1: are cases pending. There was a case argued in Florida's 90 00:05:26,440 --> 00:05:29,920 Speaker 1: High courts um in early April. There's a case that's 91 00:05:29,960 --> 00:05:33,920 Speaker 1: just been sent to California's highest court. And you know, they, 92 00:05:34,040 --> 00:05:37,120 Speaker 1: as you said, they don't have to follow New York's 93 00:05:37,160 --> 00:05:41,280 Speaker 1: decision because it's based on entirely different body of law 94 00:05:41,320 --> 00:05:44,839 Speaker 1: that is specific to to each state. But I think 95 00:05:45,040 --> 00:05:48,720 Speaker 1: what what you're likely to see as those courts struggling 96 00:05:48,760 --> 00:05:52,120 Speaker 1: with the total lack of law in this area. There 97 00:05:52,440 --> 00:05:57,160 Speaker 1: aren't many decisions in any state recognizing a recording owner's 98 00:05:57,279 --> 00:05:59,560 Speaker 1: right to be paid. And so what I think you're 99 00:05:59,600 --> 00:06:02,160 Speaker 1: likely to see is that New York decision will end 100 00:06:02,240 --> 00:06:05,280 Speaker 1: up speaking pretty powerfully to those other courts, at least 101 00:06:05,320 --> 00:06:10,359 Speaker 1: on a persuasive level, that this is probably best left 102 00:06:10,400 --> 00:06:12,880 Speaker 1: to to the legislature, and I wouldn't be surprised if 103 00:06:12,880 --> 00:06:15,440 Speaker 1: they look at their own law in Florida and California 104 00:06:15,520 --> 00:06:18,560 Speaker 1: and reach a similar result. And June, in just about 105 00:06:18,600 --> 00:06:23,720 Speaker 1: thirty seconds, will that change some of the settlements? Oh? 106 00:06:23,920 --> 00:06:26,920 Speaker 1: Probably will? I mean, you know, if you take away 107 00:06:26,960 --> 00:06:29,560 Speaker 1: the rights or the presumed rights that were the basis 108 00:06:29,600 --> 00:06:32,760 Speaker 1: for the settlement, then obviously there's going that's going to 109 00:06:32,800 --> 00:06:35,720 Speaker 1: be rethought. And I'm sure that the possibility of that 110 00:06:35,839 --> 00:06:39,640 Speaker 1: change was recognized in the settlement. Our guests are June Bessic, 111 00:06:39,720 --> 00:06:43,120 Speaker 1: executive director of the Kerniican Center for Law, Media and 112 00:06:43,120 --> 00:06:47,239 Speaker 1: the Arts at Columbia University, and Matthew Shettleham, litigation analyst 113 00:06:47,320 --> 00:06:53,920 Speaker 1: for Bloomberg Intelligence. June, Congress created this complex scheme for 114 00:06:54,240 --> 00:06:59,800 Speaker 1: copyright royalties and royalties and recordings. If states interfere with that, 115 00:07:00,360 --> 00:07:03,839 Speaker 1: would there be a lot of confusion and a lot 116 00:07:03,880 --> 00:07:07,159 Speaker 1: of disarray. Well, I don't know if you could say 117 00:07:07,160 --> 00:07:11,120 Speaker 1: states maybe interfering with it, but if there are rights 118 00:07:11,280 --> 00:07:15,640 Speaker 1: for public performance of present use sound recordings in the States, 119 00:07:16,080 --> 00:07:19,280 Speaker 1: then things will be in disarray because there are some 120 00:07:19,840 --> 00:07:25,160 Speaker 1: clear ways of licensing, at least for um uh noninteractive 121 00:07:25,960 --> 00:07:29,560 Speaker 1: playing streaming of these recordings in federal law, but they 122 00:07:29,600 --> 00:07:32,240 Speaker 1: don't exist in state law, so everything would have to 123 00:07:32,280 --> 00:07:36,960 Speaker 1: be negotiated, which is not true on the federal level. Matt. 124 00:07:37,360 --> 00:07:41,320 Speaker 1: You wrote about Serious x M and Pandora. A number 125 00:07:41,360 --> 00:07:45,440 Speaker 1: of settlements were reached in and twenty sixteen to cap 126 00:07:45,800 --> 00:07:50,000 Speaker 1: their exposure to claims, and a lot of those will there. 127 00:07:50,000 --> 00:07:53,120 Speaker 1: Pandora'sa has expired in Serious is will expire at the 128 00:07:53,200 --> 00:07:57,520 Speaker 1: end of seen, So what is the likelihood that they 129 00:07:57,560 --> 00:08:03,560 Speaker 1: may decide not to go ahead with these That's right. 130 00:08:03,600 --> 00:08:06,360 Speaker 1: So Serious did did a deal in for about two 131 00:08:07,000 --> 00:08:11,360 Speaker 1: million dollars. Pandora also did a deal in for for 132 00:08:11,480 --> 00:08:14,720 Speaker 1: nine million dollars. So so the big recording industry, the 133 00:08:14,760 --> 00:08:17,720 Speaker 1: big players here are largely sitting this out and letting 134 00:08:17,800 --> 00:08:22,280 Speaker 1: the smaller guys, a small fraction of the recording owners 135 00:08:22,320 --> 00:08:24,680 Speaker 1: go ahead with the litigation. And I think what you're 136 00:08:24,680 --> 00:08:27,200 Speaker 1: gonna see right now is more of that sort of 137 00:08:27,200 --> 00:08:28,920 Speaker 1: a sit back and watch and let's see what the 138 00:08:28,920 --> 00:08:31,680 Speaker 1: courts do with this. We we we we have this 139 00:08:31,760 --> 00:08:34,559 Speaker 1: major decision from from the New York Court of Appeals. 140 00:08:35,040 --> 00:08:37,600 Speaker 1: Now we sit back and wait to see what what 141 00:08:37,640 --> 00:08:40,480 Speaker 1: the Florida Supreme Court does with it, what the California 142 00:08:40,520 --> 00:08:43,400 Speaker 1: Supreme Court does with that, and then we see where 143 00:08:43,440 --> 00:08:46,720 Speaker 1: we land after that, and and then work out a 144 00:08:46,800 --> 00:08:51,199 Speaker 1: deal from there or perhaps look to to Congress UH 145 00:08:51,400 --> 00:08:55,560 Speaker 1: for some clarification here. Do you think follow up on that? 146 00:08:56,040 --> 00:08:59,480 Speaker 1: How likely is Congress at this point to clarify something 147 00:08:59,520 --> 00:09:01,760 Speaker 1: like this. Well, it's never a good bet to say 148 00:09:01,760 --> 00:09:04,679 Speaker 1: that Congress is going to get you know, get all 149 00:09:04,720 --> 00:09:07,440 Speaker 1: the stars aligned and and actually act, especially in an 150 00:09:07,480 --> 00:09:13,080 Speaker 1: area like copyright law that has so many contentious UH 151 00:09:13,120 --> 00:09:17,880 Speaker 1: interests involved. But UM, longer term, I wouldn't say um 152 00:09:18,160 --> 00:09:20,560 Speaker 1: right away, But longer term, I think I wouldn't be 153 00:09:20,600 --> 00:09:24,760 Speaker 1: surprised to see UH this issue clarified the next time 154 00:09:25,120 --> 00:09:28,959 Speaker 1: UH Congress UH decides to to look at copyright law again. 155 00:09:29,720 --> 00:09:33,199 Speaker 1: June Serious has said that if states create a new 156 00:09:33,240 --> 00:09:37,199 Speaker 1: form of state copyright, it could interfere with interstate commerce. 157 00:09:37,280 --> 00:09:41,000 Speaker 1: Do you buy that argument? Well, I think that's not 158 00:09:41,160 --> 00:09:44,280 Speaker 1: a really strong argument because there are a number of 159 00:09:44,360 --> 00:09:48,600 Speaker 1: areas where state's laws differ, for example, rate of publicity 160 00:09:49,160 --> 00:09:52,599 Speaker 1: UH where UM, I don't think that they've been successful 161 00:09:52,600 --> 00:09:56,800 Speaker 1: in claiming that it interferes with interstate commerce. Uh. You know, 162 00:09:57,520 --> 00:09:59,480 Speaker 1: and I think that this is the kind of case 163 00:09:59,640 --> 00:10:02,680 Speaker 1: is probably likely to get to the Supreme Court, for example, 164 00:10:02,760 --> 00:10:06,119 Speaker 1: because uh, you know, the court easily here's cases where 165 00:10:06,160 --> 00:10:08,520 Speaker 1: there is a conflict in the lower courts over the 166 00:10:08,520 --> 00:10:12,480 Speaker 1: interpretation of particular law, and here they're interpreting different laws 167 00:10:12,520 --> 00:10:14,959 Speaker 1: state by state. Um, you know, I think this is 168 00:10:15,000 --> 00:10:18,080 Speaker 1: really a question that Congress should take on. Uh. I 169 00:10:18,120 --> 00:10:19,880 Speaker 1: agree that you know whether they will or not as 170 00:10:19,920 --> 00:10:23,600 Speaker 1: another question, but the Copyright Office has recommended that Congress 171 00:10:23,720 --> 00:10:27,679 Speaker 1: bring precemply to sound recordings into federal copyright law. Matt, 172 00:10:28,160 --> 00:10:32,240 Speaker 1: The numbers are large, the settlement numbers. How much money 173 00:10:32,320 --> 00:10:35,800 Speaker 1: would be involved going forward if they started to pay royalties, 174 00:10:35,840 --> 00:10:39,319 Speaker 1: and would there be any end date? Uh So so 175 00:10:39,440 --> 00:10:41,960 Speaker 1: right now, if you think about it, both both Pandora 176 00:10:42,000 --> 00:10:46,320 Speaker 1: and Serious pay around ballpark five million dollars a year 177 00:10:46,400 --> 00:10:50,559 Speaker 1: in total royalties for these recordings. Uh. But those are 178 00:10:50,720 --> 00:10:55,040 Speaker 1: the recordings that are more current than two and and 179 00:10:55,040 --> 00:10:58,280 Speaker 1: and Pandora pay plays about five five percent of its 180 00:10:58,320 --> 00:11:00,480 Speaker 1: recordings are these oldies. So you can kind of do 181 00:11:00,600 --> 00:11:03,840 Speaker 1: that math and look at five percent of of five 182 00:11:03,960 --> 00:11:07,080 Speaker 1: hundred million and starting to Ballpark, what what this would 183 00:11:07,160 --> 00:11:09,600 Speaker 1: end up costing it and and and in fact, I 184 00:11:09,600 --> 00:11:12,719 Speaker 1: think Pandora is willing to go there if it has to. 185 00:11:12,880 --> 00:11:15,000 Speaker 1: It just wants, you know, to follow the law. And 186 00:11:15,080 --> 00:11:16,959 Speaker 1: right now the law isn't there, but I think it 187 00:11:17,080 --> 00:11:20,560 Speaker 1: Pandora has been been willing to say if Congress clarifies this, 188 00:11:20,640 --> 00:11:23,240 Speaker 1: and and maybe even that that Congress should clarify this 189 00:11:23,360 --> 00:11:26,280 Speaker 1: and so that all all owners are paid equally. But 190 00:11:26,320 --> 00:11:29,360 Speaker 1: we're looking at about you know, five per cent of 191 00:11:29,360 --> 00:11:32,040 Speaker 1: of of what it now pays about five million dollars 192 00:11:32,080 --> 00:11:35,160 Speaker 1: a year. And June, just a guess in thirty seconds, 193 00:11:35,200 --> 00:11:38,760 Speaker 1: I always give you the thirty second one. Sorry, um, 194 00:11:38,800 --> 00:11:43,559 Speaker 1: About how long before we see some kind of resolution here? Well, 195 00:11:43,600 --> 00:11:45,440 Speaker 1: I think one we are another. This will probably be 196 00:11:45,520 --> 00:11:48,560 Speaker 1: resolved in the next two or three years, whether it's 197 00:11:48,600 --> 00:11:52,440 Speaker 1: by Congress, which is probably less likely, or by the courts. Um. 198 00:11:52,520 --> 00:11:56,040 Speaker 1: Because it makes a big problem for Serious and Pandora. 199 00:11:56,440 --> 00:11:59,199 Speaker 1: The real end date for them is because that's when 200 00:11:59,200 --> 00:12:01,400 Speaker 1: all these works fall to the public domain. That's a 201 00:12:01,480 --> 00:12:05,480 Speaker 1: long time to wait. It's it seems like a lifetime. 202 00:12:06,000 --> 00:12:09,200 Speaker 1: Thank you both for being on Bloomberg Law. That's June Bessick. 203 00:12:09,320 --> 00:12:12,240 Speaker 1: She's the executive director of the Croniican Center for Law, 204 00:12:12,320 --> 00:12:16,320 Speaker 1: Media and the Arts at Columbia University, and Matthew shettle Helm. 205 00:12:16,360 --> 00:12:19,479 Speaker 1: He's a litigation analyst for Bloomberg Intelligence.