Sirius Waves a $210 Million White Flag

Settlement wraps up record labels' lawsuit re pre-1972 performance rights

They're rejoicing in the Home for Old Musicians (not to mention the Home for Companies That Own Old Musicians' Performance Copyrights). Sirius XM and several major record labels have settled one of the "Pre-1972" lawsuits that we've written about in the past. The result: Sirius XM will be paying $210 million to resolve all claims that had been advanced in the lawsuit brought by Capitol, Sony, UMG, Warner and ABKCO with respect to performance royalties for transmitting music recorded prior to February, 1972. Additionally, the $210 mil will buy Sirius XM the right to continue to transmit such music owned (or controlled) by the plaintiff record companies, but only through 2017.

This is the suit we wrote about last November; it was brought in a California state court and resulted in a key ruling, in favor of the record companies, that allowed the case to go forward to a jury trial. According to that ruling, California law recognizes the existence of a public performance right in the digital transmission of sound recordings created before February 15, 1972, even though such recordings currently receive no protection under the federal Copyright Act. Since Sirius XM plays a lot of pre-1972 tunes, it was clearly in trouble. That no doubt provided the impetus for a $ 210 million dollar settlement of the lawsuit.

Sirius XM's cash bought it only temporary relief, however.Come January, 2018, it will have to have struck a new deal - either through negotiation or, failing that, through arbitration - with the labels to cover performance royalties through 2022.

What's unclear is what this portends with regard to the other lawsuits filed on this issue, specifically those filed by Flo and Eddie against Sirius XM in California, New York and Florida and filed by the labels against Pandora in California and New York.

The Sirius XM settlement doesn't create any binding precedent. In fact, it's a good guess that that was part of Sirius XM's motivation to agree to this massive agreement: it's better to pay this money to the labels now than risk losing a bigger judgment, both financially and in terms of binding precedent, if the case were to take its course. That could, very conceivably, result in both a higher judgment against Sirius XM AND a precedent that others could use in follow-up litigation. That latter potential is not a small concern, particularly given the fact that Sirius XM already isn't looking great in the Flo and Eddie suit.

Though $210 million is nothing to sneeze at, remember that Flo and Eddie are seeking $100 million in their suit which may or may not have the same reach across the industry as this record label/RIAA-backed lawsuit. Sirius XM might simply have crunched the numbers and decided that $210M was a pretty good deal, all things considered. One has to believe they are making the same calculations with regard to the Flo and Eddie lawsuit and that Pandora has taken note as well.

With these other cases are out there, we know there will be more developments - perhaps soon - so stay tuned.