Policy Radio! By John Simson Music lovers who enjoy Pandora Internet radio may wonder why they can only skip six songs in an hour and then must wait to skip again. For that matter, why they can’t pick a specific song to hear—instead of creating a channel based upon that song? And why they can’t hear more than 4 songs by their favorite artist in a three-hour period? Congress created all of these limitations and restrictions when it passed legislation in 1995 and 1998 creating the first digital performance rights legislation in the United States. The legislation was a careful balancing act: Congress trying to balance the rights of creators: recording artists, record labels, songwriters and music publishers, along with a new category of content users “webcasters” and satellite radio services included then new services, like Pandora, that desired to stream music across cable wires, from satellites and over the Internet. Of course, for years broadcast radio has streamed music to the public from radio towers, and never had to pay recording artists or record labels for the right to play their music. But radio stations did have to pay songwriters and music publishers through ASCAP, BMI and SESAC (three organizations which represent those who own and compose music). After passage of this historic legislation, “new” services like Sirius and XM satellite radio (now merged as Sirius/XM), Yahoo and AOL Internet radio, and later Pandora and other Internet radio stations, had to pay a royalty to the recording artist as well as the songwriter. Background Music In the early 1990’s, recording artists and their record labels lobbied Congress to pass a comprehensive performance rights bill that included terrestrial radio. But the terrestrial broadcast lobby was too strong, and so a compromise was reached: the old guard terrestrial broadcasters would continue with their so-called “free pass,” but new services over cable, Internet or satellite would have to pay. Thus, while Aretha Franklin would still receive no payment from AM/FM broadcasters when they played “Natural Woman” she would now receive payment from internet, satellite and cable streaming services. Carole King, the songwriter, would continue to receive payments from both the AM/FM broadcasters and these new services. The first issue that Congress had to address had nothing to do with the content users. It was an issue between recording artists and record labels on the one hand and music publishers and songwriters on the other. 1 ©2014 John Simson. All rights reserved. The music publishers and songwriters were very concerned that if this new law were passed, one of two things might happen: 1) The record companies and recording artists would siphon off money that was currently being paid to songwriters and music publishers, who already had a right to be paid 2) More importantly, that recording companies and recording artists could simply prevent the use of their recordings by saying no to these new digital services, thus preventing the songwriters and music publishers from receiving any remuneration at all. The second concern was settled by Congress rather easily. The new right for record companies and recording artists was subject to a compulsory license; they must license their recordings—they had no choice! That’s why Pandora and other services licensed under this congressionally-mandated system can play any recording ever commercially released, while services like Spotify, which aren’t under this system, may be restricted from playing certain content. Enter the ‘Net Having settled the main bone of contention between music publishers and songwriters and recording artists and labels, Congress carved out a new compulsory license. for webstreaming. Long before Napster and P2P services sprang up, the artists and labels wanted to ensure that their music wasn’t stolen over these new digital outlets. Restrictions were made part of the license. While a new online radio service could play any recording ever released, they could only play four songs in a three-hour period by the same artist, thus preventing the creation of “all artist channels”. Online, the bandwidth was available to have as many channels as a service wanted to provide. If there was an all-Madonna channel or an all-Daft Punk channel, a listener could tune in to that channel any time they wanted to hear that artist, lessening the impulse to purchase that artist’s music (so the logic went…) So when you hear an all-artist channel, like “Siriusly Frank” or “E Street Radio”, both on Sirius/XM, you know that the artist specially licenses them. The playlist restriction,” also restricted the playing of no more than two songs in a row by a particular artist (unless it was from a box set, in which case you could play three songs in a row). John Lennon could only Imagine how much time the lobbyists representing the content owner side spent creating the language that became known as the “performance complement” in section 114 of the Copyright Act, which governs these playlist restrictions. 2 ©2014 John Simson. All rights reserved. But their work was not without complications. I’m sure they simply weren’t thinking about classical music when they created the playlist restrictions and the definitions in the statute. By their definitions, it was impossible for a classical internet radio service to play four movements in a row from the same symphony because each movement was deemed a separate track!. Imagine if you had to play the first two movements from one version of Beethoven’s Fifth and then additional movements from a different version! Classical stations cried foul and needed help to resolve this issue. Section 114 of the U.S. Copyright Act does not specifically mention skips. Why can a listener only skip six recordings in an hour? In the early days of Internet radio, the Recording Association Industry of America, (“RIAA”), acting on behalf of content owners, took the position that any skips made a service “interactive” and thus ineligible for the Congressional license. If they were interactive, like Spotify or Deezer, they’d need to get licenses from thousands of content owners and not simply take the statutory license given to them by Congress. But the RIAA entered into an agreement with a fledgling internet radio service, and for a premium price, allowed that service to offer their listeners the ability to skip up to six recordings per hour. Eventually, this became the de facto standard: six skips per hour was allowable within a non-interactive service. We don’t often think that Congressional regulations and statute may actually impact the music we hear, or the method by which we hear it, but that is certainly the case today for listeners of Sirius/XM, Pandora and other non-interactive internet webcasters. 3 ©2014 John Simson. All rights reserved. Case 2:13-cv-05693-PSG-RZ Document 1-1 Filed 08/06/13 Page 1 of 23 Page ID #:14 ~ ~ Case 2:13-cv-05693-PSG-RZ Document 1-1 Filed 08/06/13 Page 2 of 23 Page ID #:15 nI GRADSTEIN & MARZANO, P.C. HENRY GRADSTEIN (State Bar No. 89747) 2 haradstein uiastein.cam MARYANN. R.: MARZANO (State Bar No. 96867) F I LED 3 mmarzanof(dstcin . com Los Angeles Superfar;court ROBERT E. 'ALLEN (State'BarNo. 166589) 4 ralleii r gradstein s 6,310 San Vicerite .Blvd., Suite 510 AUG 0 1 ' ~~ 5c Los Angeles, California 90048 Ob T: 323776-3100 - F: 323931-4990. Jahn A. , FWcerIGler4t EV AN , S. COHEN (State Bar No . 119601 ) 7 csc n -Hans f' 'to.eom • 1 180 South Beverly Drive, Suite 510 8 Los Angeles, `California 90035 T: 310-556-9860: F: 310-556-9801 9. Attorneys for'Plaintif -~-~ 10 FLO'&EDDIE, INC. a m'p 12 ' SUPERIOR COURT OF'THE- STATE OF CAE IF'ORN1A `" .. 13 FO1 THE COUNTY-OF LOS ANGELES, CENTRAL -DISTRICT' . 14 FLO' & EDDIE INC., a California , Case No. corporation , individually and on behalf of all 1•5: .others similarly situated, CLASS- ACTION 16 Plaintiff, COMPLAINT FOR: 17Q v. 1. MISAPPROPRIATION (Cal Clio. Code '§ 980(a)(2) enid Common 18 STRIPS : M RADIO, 'INC., a Delaware Law]; - corpiration; and DOES I through 100, 2. UNFAIR COMPETITION 19 [Cal Bus. & Piro#. Code § 17200 and Defendants. Common Law]; AND 20 3. CONVERSION 21 • DEMAND FOR Jli1RYJRIAL „ 24 -- r µ 25• G7 9 ► `W 3 27 dog Q } 'CLASS ACTION COMPLAINT L Case 2:13-cv-05693-PSG-RZ Document 1-1 Filed 08/06/13 Page 3 of 23 Page ID #:16 Plaintiff FLO & EDDIE, INC. ("Plaintiff` or "Flo & Eddie") files this class action 21 Complaint on behalf of itself and on behalf of all other similarly situated owners of sound recordings of musical performances that initially were "fixed" (€.e., recorded) prior to February 15, 4 1972 (the "Pre -1972 Recordings") against Defendants SIRIUS XM RADIO, INC. ("Defendant" or 5 "SiriusXM") and DOES 1-100, and alleges as follows: 6 NATURE OF THE ACTION 7 California Civil Code Section 980 (a)(2) provides that "[t]he author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has 9 an exclusive ownership therein until February 15, 2047, as against all persons except one who 10 independently makes or duplicates another sound recording that does not directly or indirectly 11 recapture the actual sounds fixed in such prior sound recording, but consists entirely of an V A 12 independent fixation of other sounds, even though such sounds imitate or simulate the sounds 13 contained in the prior sound recording." The unauthorized duplication and exploitation of Pre- 1t; tZ W R 14 1972 Recordings in California constitutes misappropriation, unfair competition and conversion.