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Sirius hits out at labels and others for trying to intervene in Flo & Eddie settlement

By | Published on Wednesday 12 April 2017

Flo & Eddie

American satellite broadcaster Sirius has asked a judge to ignore an intervention from various US music industry trade bodies in relation to its settlement with Flo & Eddie et al over the payment of royalties on tracks released pre-1972.

As much previously reported, in America sound recordings released before 1972 are protected by state rather than US-wide federal copyright law. That has resulted in all sorts of legal wrangling over whether or not online and satellite radio services – which, unlike American AM/FM radio stations, are obliged to pay artists and labels royalties under federal law – are likewise obliged to pay royalties when they play state-protected pre-1972 tracks.

The debate over such royalties has been rumbling on for years, and is summarised in this CMU Trends article here. The key legal case has been that led by artists Flo & Eddie, who were in 1960s band The Turtles. They scored a big win in the Californian courts, on the back of which both Sirius and Pandora reached deals with the major record companies on this issue. Sirius subsequently reached a deal with Flo & Eddie as well. Their litigation had become a class action, so the deal – which is dependent on the outcome of various outstanding appeals and hearings in various states – is subject to court approval.

Although that deal only directly affects artists who are members of the class, various organisations representing American labels and musicians, and collecting society SoundExchange, have raised concerns about the wording of some elements of the settlement agreement. They fear that Sirius is hoping to use the settlement to argue for lower royalties overall when the US Copyright Board next decides what rates the satellite broadcaster should pay the record industry on post-1972 recordings via its SoundExchange licence.

Sirius, and many online radio services, rely on a compulsory licence available under American law to access sound recordings. That compulsory licence obliges labels to license satellite and online radio services at rates set by the statutory Copyright Royalty Board.

Rather than just picking a random royalty rate out of the air, the CRB – which is yet to set the royalties that Sirius should pay between 2018 and 2022 – hears arguments from both sides as to what a fair market rate would be. You know, before it randomly picks a royalty rate out of the air. Some fear that the satellite broadcaster now plans to use its class action deal with Flo & Eddie et al to argue that the market rate for the record industry’s content is lower than what it currently pays.

According to The Hollywood Reporter, the line that is causing most concern in the Flo & Eddie settlement reads: “The parties agree that [the royalty rate] represents the rate that has been established by negotiations between a willing buyer and willing seller in a competitive market for pre-1972 sound recordings, and shall be precedential in all future and/or pending proceedings (including rate making proceedings and arbitrations) relating to sound recordings”.

Wary about the precedent that agreement could set, the trade groups and SoundExchange have filed an amicus brief to the judge considering the class action deal. In it they say: “[It] is clear from the settlement’s face, as well as obvious marketplace facts, that the proposed royalty rate is well below the market rate for sound recordings, particularly classic sound recordings that are among the world’s most valuable. Far from having anything to do with the settlement’s economic terms, this language just gives Sirius fodder for future rate-setting proceedings – at the expense of copyright owners and recording artists”.

Sirius has now disputed the claims made in the amicus brief, while also insisting that the trade groups behind it have no role in the case and shouldn’t be allowed to intervene. The broadcaster said the authors of the amicus brief “are not class members and have no legitimate interest in this matter” and that their attempted intervention is neither “legitimate, relevant, or helpful” in helping the judge to decide whether to approve the settlement in the class action.

Notably, the Sirius filing doesn’t say that the satellite broadcaster won’t present this settlement as evidence in the next CRB rates review, and those behind the amicus brief will likely feel that proves their point. It remains to be seen how the judge overseeing the Flo & Eddie case responds.