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This is The Legal Beat, a weekly newsletter about music law from Billboard Pro, offering you a one-stop cheat sheet of big new cases, important rulings, and all the fun stuff in between. This week: Major law firms cut ties with Kanye West over his antisemitic comments, Slacker fights with SoundExchange over a huge royalties judgment, Coachella sues a nearby business called “Coachillin,” and much more.
THE BIG STORY: Kanye West Is Running Out of Lawyers
After a string of antisemitic statements earlier this month, Kanye West has lost nearly every aspect of his once-formidable business empire. His representatives at CAA have dropped him, and his signature fashion partnerships with Adidas, The Gap and Balenciaga have all been terminated.You can now add his lawyers to that list.Cadwalader Wickersham & Taft, the prestigious Wall Street firm that represented Kanye in his dealings with Gap, confirmed to multiple outlets last week that the firm is not currently representing him and “have made the decision not to work with him in the future.”Greenberg Traurig, a top music firm that’s repping him in both a copyright lawsuit and an employment case, said it was taking steps to withdraw from those cases as fast as ethically possible: “This firm was founded by individuals who faced discrimination and many of us lost ancestors because of that kind of hate and prejudice,” the firm wrote in a statement, referring to Jewish founders Larry Hoffman, Mel Greenberg and Robert Traurig.Robert Cohen of Cohen Clair Lans Greifer Thorpe & Rottenstreich, the rapper’s sixth divorce attorney in his split with Kim Kardashian who he only just hired in September, has also dropped him, according to a report from Reuters. And Brown Rudnick partner Camille Vasquez, who rose to prominence representing Johnny Depp in his defamation case against Amber Heard, quit just days after being hired by the embattled rapper, as first reported by the New York Post.It seems even prospective lawyers are distancing themselves. Quinn Emanuel Urquhart & Sullivan partner Alex Spiro, a Billboard Top Music Lawyer who reps Jay-Z and Elon Musk, told Reuters that Ye “asked me to be his attorney but the representation never formalized.” Spiro made it clear: “I do not represent Mr. West.”A lack of options for legal representation isn’t a great situation for West, because he has no shortage of legal problems.Even if he avoids any court battles over his various corporate breakups — and that’s far from certain, given the messy web of intellectual property he splits with Adidas and other former partners — he’s still got plenty of litigation ahead, including looming December deadlines in the divorce case; multiple copyright lawsuits over claims of illegal sampling; a case claiming he stiffed a production company that worked on his Sunday Service; a lawsuit claiming he refused to return clothes to a high-end fashion rental service; a case claiming he owes $4.5 million to a celebrity accountant he abruptly fired; and threats of lawsuits from the family of George Floyd over his incendiary statements about Floyd’s killing.
Other top stories this week…
SLACKER’S ROYALTY WOES – Slacker warned a judge that a recent ruling, requiring the streamer to hand over nearly $10 million in unpaid royalties to SoundExchange, would cause “economic damage” for the company that would be “unsustainable.” But SoundExchange quickly fired back that it had spent years “indulging” such excuses and that labels and artists had waited “long enough” to get paid by the streamer: “The court should deny defendants’ latest attempt to shirk their obligations with the promise that next time will be different.”COACHELLA v. ‘COACHILLIN’ – AEG’s Goldenvoice, the owner of Coachella, filed a trademark infringement lawsuit over a planned “Coachillin” business park located just a few miles north of the festival grounds at the Empire Polo Club. The suit said the 160-acre development plan, aimed at cannabis businesses, isn’t a problem — but needs to pick a new name: “The public has come to associate the phrase ‘Coachillin’ to refer to the Coachella Festival and plaintiffs, not merely to refer to the Coachella Valley — and certainly not Coachillin Holdings.” The case is the latest in a string of trademark cases from Goldenvoice, which sued Ticketmaster last year over a New Year’s Eve concert called “Coachella Day One 22″ and sued a West African company last month over an event called “Afrochella.”COMEDY CARTEL? JUDGE SAYS NO – A federal judge rejected one of Pandora’s key arguments in its legal battle with comedians, dismissing claims that a licensing group called Word Collections was operating as an illegal comedy “cartel” that violated federal antitrust laws. The ruling came in sprawling litigation filed by a slew of comics who want Pandora to start paying the equivalent of publishing royalties for spoken-word content. Faced with those allegations, the streamer responded by arguing that Word Collections and the comedians were effectively trying to create a “monopolistic portfolio” of comedy rights, aimed at “dramatically increasing” the prices streamers must pay. But in the ruling this week, the judge didn’t buy it — saying Pandora didn’t properly allege that the comics had conspired to fix prices, nor that their grouping amounted to an illegal monopoly in the comedy world.BAIL REVOKED FOR TORY LANEZ – A Los Angeles judge ordered Tory Lanezto be placed under house arrest ahead of a trial over accusations that he shot Megan Thee Stallion, citing an incident last month in which the singer allegedly assaulted singer August Alsina in Chicago. The singer is facing more than 22 years in prison over the alleged July 2020 altercation with Stallion, in which he allegedly shot her in the foot during an argument following a party in the Hollywood Hills. The trial is set to kick off at the end of November and the singer had been out on bail, but in September Alsina claimed that Lanez and his entourage attacked him following a Chicago concert. Prosecutors at the time said they were investigating those claims, and Judge David Herriford cited the accusations to revoke Lanez’ bail this week.
SiriusXM’s profits fell in the third quarter from a year ago on higher expenses and lower profits from Pandora, but overal revenues rose thanks to SiriusXM subscriber growth, the satellite radio company reported on Tuesday.
Sirius XM Holdings Inc. reported net income fell to $247 million, or earnings per diluted share of $0.06, in the quarter ending Sept. 30, 2022, from $343 million, or $0.08, during the third quarter last year. In its Pandora and off-platform segment, gross profits fell 12% on lower subscriber revenue and higher costs from investments in podcast content, the company said in its earnings release.
Revenues rose 3.6% to $2.28 billion from $2.198 billion in the third quarter 2021, while adjusted EBITDA was $720 million for the quarter, roughly flat year-over-year. The company reiterated that it expects full year revenues of $9 billion, with an adjusted EBIDTA of $2.8 billion.
Total operating expenses rose by more than 15% to $1.813 billion in the quarter on increased subscriber acquisition costs, marketing, sales and general administrative expenses.
Subscriber acquisition costs rose 21% to $86 million due to higher equipment installations by automakers, executives said. That and along with investments and other expenses caused the company’s free cash flow to fall 44% from a year ago to $329 million.
In addition, SiriusXM announced its board voted to raise the quarterly cash dividend by 10%, which it will pay out later this month. The company returned $262 million in capital to stockholders in the quarter, chief financial officer Sean Sullivan said in a statement.
“We continue to drive growth and focus on a disciplined approach to cost management across our organization,” chief executive Jennifer Witz said on a call with analysts. “While near-term objectives remain top of mind, we are focused on the strategy and investments that will drive long-term value for our stockholders.”
SiriusXM third quarter financial highlights:
SiriusXM reported 32.2 million self-pay subscribers, reflecting an increase of 187,000.The total number of subscribers rose to 34.2 million, including a decline of number of 49,000 paid promotional subscribers. The company’s self-pay monthly churn rate remained at record-low levels at 1.5%.Revenue for SiriusXM rose 5% to $1.7 billion compared to last year on self-pay subscriber growth and a 6%-increase in advertising on the SiriusXM platform.Total cost of services at SiriusXM rose 3% to $665 million for the quarter from the third quarter 2021.
Pandora and Off-Platform third quarter financial highlights:
Gross profit for Pandora and Off-Platform segment fell 12% to $173 million for the third quarter 2022, from $197 million a year ago.Pandora monthly active users fell 7% to 48.8 million compared to 52.6 million in the third quarter a year ago, and subscriber revenue declined by 2%.Pandora Plus and Pandora Premium self-pay subscribersheld flat at 6.3 million.Advertising revenue edged 1% higher to $407 million, as total ad-supported listener hours fell to 2.75 billion in the quarter compared to 2.89 billion a year ago. Podcasting and off-platform business revenues rose 37% to $123 million.The total cost of services increased by 7% driven primarily by investments in podcast content.
A federal judge has rejected one of Pandora’s key arguments in its legal battle with comedians, dismissing claims that a licensing group called Word Collections was operating as an illegal comedy “cartel.”
Months after a slew of comedians (including the estates of George Carlin and Robin Williams) sued Pandora to seek more royalties for spoken-word content, the streamer fired back in May with allegations that the comics had violated federal antitrust laws by doing so.
Pandora claimed that by teaming up with Word Collections to demand such royalties, the comedians were effectively trying to create a “monopolistic portfolio” of comedy rights, aimed at “dramatically increasing” the prices streamers must pay for comedy.
But in a ruling on Wednesday, Judge Mark C. Scarsi dismissed those claims. He said Pandora had not properly alleged that Word Collections and the comedians had conspired to fix prices, nor that they amounted to an illegal monopoly in the comedy world.
“Pandora’s description of Word Collections’ impressive but short list of comedians whose works it licenses does not suffice to demonstrate that Word Collections owns a dominant share of the comedy recording market in the United States,” the judge wrote.
The ruling is a blow for Pandora, though not a fatal one. The judge left open the possibility that the streamer could re-raise the issue, and the company can still pivot to other defenses, like the more fundamental argument that comics are simply not legally entitled to the added royalties they’re seeking.
A rep for Pandora declined comment.
Judge Scarsi’s decision came amid a long and tricky fight over how and when streamers like Pandora must pay for the comedy recordings that appear on their services – a more unsettled legal question than one might think.
Every piece of music is covered by two copyrights – one for the sound recording itself and another for the underlying work that’s been recorded. Streaming services like Pandora pay for both when it comes to songs, but for comedy records, they’ve typically only ever paid for the recordings.
Part of the problem is that there is no society like ASCAP or BMI to collect such royalties for spoken works. Over the past 18 months, two groups – Word Collections and Spoken Giants – have moved to fill that void and have begun asking streaming services to pay those fees for comedy; those efforts are what prompted Spotify to pull down some comedy content last fall.
And since February, a number of comedians have taken the issue to court, accusing Pandora of willfully refusing to pay for content: “Pandora did what most goliaths do: it decided it would infringe now to ensure it had this very valuable intellectual property on its platform to remain competitive, and deal with the consequences later. Later is now.”
Pandora has sharply refuted the allegations, arguing it has “always satisfied its copyright obligations” by paying “millions of dollars in license fees every year” for comedy recordings. It says that comedy records are less akin to music and more like movies, for which streamers like Netflix typically pay only a single, all-encompassing license, regardless of the various elements that are used in the film.
If Pandora’s antitrust counterclaims remain dismissed, those core arguments about copyrights and licenses could now take center stage in the case.
Richard Busch, a prominent music litigator who is representing the comedians, told Billboard on Thursday that he and his clients are “obviously very happy with the decision.”
“We always believed the antitrust counterclaim Pandora brought was ludicrous and a transparent attempt to intimidate these legendary comedians,” Busch said. “The court could not have been clearer in its ruling. We now hope to be able to focus on and litigate the serious copyright infringement claims that are at the heart of this litigation.”