SiriusXM has agreed to pay Flo & Eddie, and the other pre-1972 song rights owners in their class, at least $25 million as part of a settlement reached earlier this month on the eve of a California federal trial. Depending on appeals, the figure could rise to $40 million to resolve claims of past misappropriation plus an estimated $45 to $59 million for a 10-year licensing deal moving forward. All together, pending a judge's approval, SiriusXM could be looking at paying $99 million to independent musicians for the rights to perform "Happy Together" and other older hits.
Pre-1972 sound recordings aren't protected by federal copyright. So two members of oldies band The Turtles, Mark Volman and Howard Kaylan (Flo & Eddie), sued under various state laws to be compensated for what was played on stations like SiriusXM Radio's '60s on 6.
The duo won summary judgment in 2014 when a California federal judge found Sirius' use of their music violates public performance rights.
That $25 million is just the baseline, according to a motion for preliminary approval of the settlement filed Monday. Just how much that needle moves depends on what happens in the 2nd, 9th, and 11th Circuits when Sirius challenges its liability. By reserving the right to address the relationship of satellite music to the Commerce Clause, Sirius XM also has an eye on possible review by the U.S. Supreme Court.
"In exchange for a contingent payment of an additional $5 million to the Settlement Class and a 2% increase in the royalty rate otherwise owed, the Settlement provides that Sirius XM preserves its right to appeal the Court's final judgment of liability on the performance right issue and Commerce Clause issue in this Action, but Sirius XM has also agreed that it will not appeal the Court's class certification rulings," states the motion. "[T]he parties also preserve their respective rights to proceed with the appeal of two related actions, the New York Action and the Florida Action."
Sirius could pay an additional $15 million more if Flo & Eddie prevail on appeals in all three states. (Read the proposal in full here.)
"On a per-play basis, the minimum $25 million settlement represents approximately an award of $15.68 per play; the $40 million settlement represents approximately $25 per play," states the motion. "None of these funds revert back to Sirius XM. By any measure, that compensation by itself is an excellent result."
Sirius had previously reached a $210 million settlement with major record labels for their share of pre-1972 plays. According to the motion for preliminary approval, the potential $40 million settlement here for past alleged misappropriation is proportional to what the majors got.
The proposed settlement also gives Sirius a 10-year license, expiring in January 2028, in exchange for royalty payments of up to 5.5 percent. The exact rate depends on the outcomes of appeals as well.
"If Sirius XM prevails regarding its appeal in the U.S. Courts of Appeal for the Second, Ninth, or Eleventh Circuits, or in the United States Supreme Court based on the question of whether it would violate the Commerce Clause of the United States Constitution to apply a state-law right to control and/or demand compensation for the public performance of Pre-1972 Sound Recordings, Sirius XM will not be required to make any prospective royalty payments, but the Settlement Class will keep all royalties previously paid," states the motion.
Flo & Eddie's expert estimates the license will generate between $45 to $59 million in additional cash payments to class members over the next decade.
"We are grateful to our clients, Mark Volman and Howard Kaylan of Flo & Eddie and The Turtles, who had the tenacity to stay the course over three grueling years of litigation on behalf of all members of the class, because they believed in what was right," says attorney Henry Gradstein.
A hearing on the motion for preliminary approval is set for Jan. 30. SiriusXM is represented by O'Melveny & Myers and Weil Gotshal & Manges. Flo & Eddie are represented by Gradstein & Marzano and Susman Godfrey.