Good News: Sirius XM Settles Pre-1972 With Turtles! Bad News: Settlement Slashes Sound Recording Royalty 50%

Listen to Music Tech Policy podcast with Chris Castle and Henry Gradstein 

This is a complicated one.  And I honestly don’t know how I feel about this.  I’m glad to see the Turtles win this case. Glad to see that Sirius is willing to pay on these pre-1972 recording,  not just for past plays but also going forward.  This was a tough fight for the the Turtles and lead attorney Henry Gradstein.   It’s rare to find artists and attorneys willing to take on a 3-5 year lawsuit like this without the backing of a major law firm.    All should be commended for their persistence.

However,  I also find what appears to be some bad news here.  About 2/3 the way through the podcast Henry Gradstein states:

“Everyone is gonna do very well with this settlement, just do the math”

Well I did the math and this is not necessarily true. I mean it is true in the sense that something for pre-1972 recordings  is better than nothing.  But what the proposed settlement does is apply a pro rata royalty rate of 5.5% of revenue to pre 1972 masters.   This  is kind of screwed up because the compulsory rate set by the Copyright Royalty Board (CRB) for post 1972 masters is 11%.  Maybe I’m misunderstanding something but it looks like now we have  two different royalty rates for pre and post 1972 recordings with the pre-1972 artists getting a raw deal.  Further what happens when Sirius turns this in as “evidence” at the next CRB rate court hearing for satellite rates?  The CRB could slash EVERYONE’s rate, including post 1972 recording.

This is not far fetched.  We watched Pandora use this exact same tactic on the low wattage  bunch over at MERLIN.  Essentially MERLIN cut a deal with Pandora for lower royalty rates for their independent labels in exchange for more airplay.   Then Pandora took this deal to the CRB and used that as a marker and set all rights holders  rates lower.  If you do the math on the Merlin deal it will cost ALL rights holders nearly $1 billion over 5 years. Read here:

https://thetrichordist.com/2014/10/28/charles-caldas-of-merlin-independent-labels-minus-15-million-dollar-man/

https://thetrichordist.com/2016/03/16/billboard-finally-agrees-the-pandora-merlin-deal-will-cost-rights-holders-a-billion-dollars-in-soundexchange-royalties/

This is where i’m deeply conflicted.   If you are the Turtles and Gradstein you are truly in a David and Goliath fight.  A company like Sirius could simply delay, delay and delay until your law firm runs out of money.   Gradstein may have spent millions of dollars at this point.  The legal fees and research that goes into gathering evidence for a case like this is shocking.  I myself spent three years doing research for  a class action against a music service.   Legal fees were the tip of the iceberg.  Hypothetically if one suspected a streaming service of illegally (peer to peer) copying, streaming and displaying your work without authorization one might have to hire forensic computer experts to “packet log” and otherwise document unauthorized copying, performance and display of 100s of tracks in dozens of US states and foreign territories.  This is not cheap!

So if you consider the fact that Gradstein was looking at the possibility of never recouping the money he spent on this lawsuit you can see why he might accept a less than perfect deal for the pre-1972 recordings.   Yet the fact remains, we are left with the troubling situation that post 1972 masters are worth 11% of gross revenue,  but pre 1972 masters are worth 5.5%.   This will not stand, Sirius would be stupid to not to use this to argue for a royalty rate reduction for all master recordings at current CRB hearings.  Further they have the fiduciary responsibility to their share holders.

I have a bad feeling about this.

 

About David C Lowery

Platinum selling singer songwriter for the bands Cracker and Camper Van Beethoven; platinum selling producer; founder of pitch-a-tent records; founder Sound of Music Studios; platinum selling music publisher; angel investor; digital skeptic; college lecturer and founder of the University of Georgia Terry College Artists' Rights Symposium.

One thought on “Good News: Sirius XM Settles Pre-1972 With Turtles! Bad News: Settlement Slashes Sound Recording Royalty 50%

  1. Definitely not a free market deal other things in consideration like the lump sum Financial duress exedra we should be able to argue that this is not a free market deal

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