Digital music companies are locked in a bitter battle with the record industry, which wants the likes of SiriusXM and Pandora(P) – and by extension consumers – to start paying a new type of copyright royalty for 50-year-old music. On Wednesday, the companies suffered a new setback as a federal judge gave the green-light for former members of the band The Turtles to lead a lawsuit on behalf of other musicians, most from the 1960’s era, who want to collect from SiriusXM (SIRI).
The latest ruling came via U.S. District Judge Philip Gutierrez, who issued an order granting a request by the Turtles singers, known for 1960’s hits like “Happy Together,” to seek class action damages. If they prevail, the payouts by SiriusXM and other digital music services like Apple (APPL), which are ensnared in related litigation, could amount to millions or even billions of dollars.
The Gutierrez order is a procedural step, but is significant because, if it is allowed to stand, the class action status will give the performers and their lawyers more leverage to force a settlement.
Gutierrez’s order is the latest twist in the music industry’s quest to cash in on a novel legal theory. That theory, which many copyright scholars regard as far-fetched, holds that SiriusXM and anyone else who performs digital music must pay royalties for pre-1972 sound recordings under a patchwork of state laws, even though copyright law is federal.
That upshot is that the digital music companies could owe years of back royalties. These alleged unpaid royalties concern performers (the singers and musicians on a given recording) as opposed to song writers,who are already paid under federal law.
Wednesday’s ruling, which also said SiriusXM should pay damages on the basis of gross revenue related to pre-’72 songs, increases the stakes in a larger copyright battle that is taking place in multiple states, and on Capitol Hill as well.
The music industry has characterized the dispute as one in which greedy digital music companies are depriving old musicians of their due. Critics, including me, view the campaign as an attempt by the music industry to obtain new money for old rope. If successful, it will lead to consumers paying a windfall to lawyers and record labels – with none of the money going to support younger musicians who most need the support.
Currently, things look bleak for SiriusXM and for digital music fans since the state copyright theory has gained traction before three different judges. The best hope for now is for an appeals court to declare that Congress intended to federalize copyright law entirely, and that the wisdom of granting windfalls for pre-1972 performances should be decided by Congress, not a patchwork of state courts. The Second Circuit in New York has already agreed to hear one of SiriusXM’s appeal, while the Ninth Circuit in California is considering one by Pandora.
For more details of the class certification ruling, see Eriq Gardner’s detailed account in the Hollywood Reporter.