Music labels sue Pandora over royalties for golden oldies

Several major U.S. music companies sued Pandora Media Inc on Thursday, accusing the online streaming service of cheating them out of royalties by playing thousands of pre-1972 recordings without paying royalties.

The music in question, from musicians such as the Beatles, Louis Armstrong, Marvin Gaye and Fleetwood Mac, is "some of the most iconic music in the world," the lawsuit said.

The lawsuit, filed in New York state court in Manhattan, seeks unspecified damages and an immediate halt to Pandora's "massive and continuing unauthorized commercial exploitation" of older songs.

The plaintiffs include Vivendi SA's Capitol Records Inc and UMG Recordings Inc, Sony Corp's Sony Music Entertainment, Warner Music Group Corp and ABKCO Music & Records Inc.

"Pandora is confident in its legal position and looks forward to a quick resolution of this matter," a Pandora spokesman said in an email.

Federal copyright law does not apply to pre-1972 recordings, but the plaintiffs say New York state law provides copyright protection for such recordings.

"Pandora's refusal to pay plaintiffs for its use of those recordings is fundamentally unfair," the lawsuit said.

The lawsuit is not the first to seek fees from digital music companies for pre-1972 recordings.

Last year, for instance, a U.S. nonprofit that collects digital royalties for musicians, SoundExchange, filed a federal lawsuit in Washington, D.C., against satellite radio company Sirius XM Holdings Inc that includes claims of underpayment regarding pre-1972 recordings. The lawsuit remains pending.

Royalties represent a major expense for Pandora, currently amounting to approximately half of its annual revenue, and keeping them from increasing is crucial to the company's business.

"If we are required to obtain licenses for pre-1972 sound recordings to avoid liability and are unable to secure such licenses, then we may have to remove pre-1972 sound recordings from our service, which could harm our ability to attract and retain users," the company said in a regulatory filing in February.

In an unrelated case in March, a federal judge in New York declined to alter the rate that Pandora pays to songwriters to license their music, following a nonjury trial that pitted the American Society of Composers, Authors and Publishers against Pandora.

The case is Capitol Records et al v Pandora Media Inc, New York State Supreme Court, New York County, No. 651195/2014.

© Thomson Reuters 2014