Rdio is pushing back against Sony in Rdio’s bankruptcy case. You may recall that Sony has sued 3 former Rdio executives for fraud in relation to Rdio’s sale to Pandora and Chapter 11 filing. Rdio has hired Winston Strawn to investigate whether Sony conspired with other record labels to fix prices in the subscription streaming service market. According to the attached motion filed in N.D. Cal. Bankruptcy Court, Rdio “believes that Sony and Orchard have engaged in anticompetitive conduct to fix and control prices and unreasonably restrain trade for the licensing, marketing, and use of music by services, like the Debtor, for the digital streaming of music to consumers worldwide.” The bankruptcy code provides fairly broad discovery for debtors to investigate creditor claims, so Rdio might actually be able to get some documents out of Sony. As the first major interactive service to go belly up, this may be the opening salvo in Sherman Act claims against the labels.
Sony has engaged Glenn Pomerantz from Munger Tolles, who represented SoundExchange in Web IV.
As I’ve often said, reviewing litigation dockets is a great place to learn new things. Instead of focusing on a judge’s final decision, one can often learn more by reading the party’s pleadings, which provide the strongest advocacy for a particular legal position. [caveat–it is critical to read BOTH side’s pleadings]. It is also often the case that a recording artist or songwriter’s contract will be appended to the complaint, providing useful insight not only into the issues in a particular litigation, but towards how the music industry evolves over time. I was reading Rita Ora’s recording contract with Roc Nation–a copy of which can be found here–and I remembered some research I’d done a while ago but never bothered to post here. Specifically, a review of 3 recording contracts executed between 1983 and 1992 demonstrate how public performance for sound recording royalties made their way into major label recording contracts. [caveat–this is not intended to be scientific; it is merely an interesting fact based on the 3 contracts in question]
So, check this out. In 1983, CBS did *not* have any language about public performance rights in sound recordings—check out the Toto contract below. By 1989, the language does exist—see 10.04 of the Allman Bros. agreement with CBS reproduced below. Identical language appears in the Interscope license with Dr. Dre is 1992—see 10.05 of the Dre agreement reproduced below—even though I’m not aware of any relationship between CBS (which was bought by Sony) and Interscope (which was bought by UMG)!
Last year, 19 Records, the label that represents the recording artists from the TV series American Idol, sued Sony, 19 Records’ distributor, for underpayment of royalties. Specifically, 19 Records claimed that Sony paid royalties at the lower rate corresponding to the sale of physical records instead of the higher rate corresponding to a license for use. As background, attorney Richard Busch successfully represented Eminem’s former management team in a similar lawsuit against Universal and has filed numerous similar lawsuits against each of the major labels.
Yesterday, 19 Records amended its complain to include allegations that Sony’s agreements with Spotify amount to self-dealing; alleging “Sony … structured its agreement with the streaming service, Spotify, in a manner designed to rob 19, its artists, and other artists of royalties.” The amended complaint contains the specific allegation that Sony’s insisted on receiving free advertising to generate revenue that it would not have to share with artists: “For instance, Sony’s agreement with Spotify gives Sony up to [REDACTED] in advertising which Sony is free to resell or have resold for it. Thus, Sony is able to collect up to [REDACTED] under the terms of its agreement with Spotify and then claim that none of the income is attributable to the exploitation of a master recording, and thus not subject to the payment of royalties to Sony’s recording artists and 19.”
If history is a guide, Busch will file similar suits against the other majors on behalf of his other clients.