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Music Row Dealmakers
Prominent entertainment attorneys Barry Neil Shrum & Dennis Disney explore their world of closing deals from Nashville's Famed Music Row, in the heart of Music City. We are the dealmakers, from composing to closing.
Music Row Dealmakers
Who Pays the Players? The Musicians’ Union Sues UMG & Warner Over the AI Deals — and the Labels Move to Dismiss
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The labels sued Suno and Udio for stealing from artists — then settled, licensed their catalogs to those same AI companies, and (says the union) kept the money. Barry Neil Shrum and Dennis Disney break down the American Federation of Musicians’ federal lawsuit against Warner and Universal: the 1940s-vintage “new use” rule in the Sound Recording Labor Agreement, why licensing masters into an AI training set may trigger it, and why the session players who built the Nashville Sound — the A-Team — could be owed both pay and credit. Plus the labels’ brand-new motion to dismiss — their argument that the new-use clause “cannot function” without a pre-set AI rate, the union’s answer that there’s no arbitration clause so it had to sue, and why Barry thinks the labels’ “no rate, no breach” theory may prove the union’s point. Compared with last week’s Gavel Drop, GEMA’s copyright win over Suno in Munich, and where the U.S. Suno case in Boston stands. General information, not legal advice.
Welcome to Music Row Dealmakers, where we explore our world of making deals from Nashville's famed Music Row in the heart of Music City. We are the deal makers, from composing to closing. Now, here's your hosts, Barry Nielstrom and Dennis Disney.
SPEAKER_02Hello, all our faithful deal makers out there listening in. Thank you for your continued support and welcome to episode 26 of Music Road Dealmaker. That marks the first year of this show. Dennis and I appreciate every one of you, and uh, we are working to extend the reach of this show, as you may know. Please share a link, repost us on your socials, subscribe to our YouTube music uh channel, Music Road Dealmakers, it's called, where you can find gavel drops and all kinds of special editions of Music Road Dealmakers. So hit that subscribe button wherever you listen. I'm Barry Neil Schrom, founding partner of Schrom Disney and Associates, and I'm here with my my co-host and and law partner, uh Dennis Disney. Dennis, uh we've we've missed you. You've been a busy B lately as I've been uh keeping our our listeners updated with those gavel drops.
SPEAKER_03It's it's been a busy summer, shall we just say? Yes. Good, good summer, but but busy.
SPEAKER_02Good. Good. Well, that's what we like around here. We like the busy summer. Now let me get uh folks, I am a little unused to this fancy equipment we we just got for this for the video podcast. So uh bear with me while I make some transitions here and there. Now you're seeing a split screen with both me and Dennis. Before we dig dig in, again, if you'd like to interact with us here on Music Row Dealmakers, that's 8777 Dealmakers. That's our number. Or email us with questions at musicroledealmakers.com, and uh we'll take those into consideration and maybe even call you to be on the show. Who knows? Uh so now if you caught my last edition of Gavel Drop over on the YouTube channel last week, you know that a court in Munich uh just ruled against Sono. And everybody knows who Sono is, the AI Music Company, and it handed a big win to GEMA, a G E M A, which is uh the German songwriters songwriting society. Dennis, we're not too familiar with that in the U.S., but it's like ASCAP or the MI CSAC. Uh, the court said in in very plain terms that training and generating AI music using copyrighted songs wholesale with without a license is is infringement. The ruling's in, the mic's draw. What do you think about that, Dennis?
SPEAKER_03I applaud that. Yeah, no doubt. Anyone who represents creatives, writers, performers, authors of any sort ought to be applauding.
SPEAKER_01Oh, dissent by all me. And and again, hey, use it.
SPEAKER_02Just get the mic. I mean, it it it it sets the tone, I think, for the discussion. You know, I as I pointed out in the gavel drop, the US has been trending toward favoring tech and favoring fair use. And the Gemma court in Germany found the angle that supports the right holders, which, like you said, applaud it, cheer it, celebrate it.
SPEAKER_03Yeah, it's I mean, the the distinguishing aspects between that and what we're going to talk about today, that was a copyright case. Correct. And this what we're talking about today really is contract.
SPEAKER_02Yeah. Yeah, and it's it's a different angle, right? But but I think both you and I talked about this. This this kind of brings the fight back home here to Nashville because it involves the union. And you're right, it's not about the songwriters, it's not about the copyright and the song, or even the copyright and the sound recording. It's about the people who play the music.
SPEAKER_03Exactly. And what most people may or may not know is that these major record companies all have contracts with the musicians union. It's not just the record company, the film companies and others as well. And if you're a signatory uh to the union agreement, then you're supposed to operate under that agreement. It's a collective bargaining agreement. And so uh this this whole case was initially brought under, I think it was Section 301 of the Labor Management Relations Act. Right. Because it deals with, hey, we have a collectively bargained agreement for our musicians for you to use the work of our musicians. And this particular argument is the unions are going, wait a minute, you're using our our players' performances in a way that is contrary to the contract.
SPEAKER_02And they're yeah, and exactly obviously the other side. They're arguing the opposite. Well, let's let's let's um make it a little bit less esoteric. I mean, when we talk about unions and and the American Federation of Musicians, you know, it kind of gets a little bit obscure, but anybody that's been to Nashville, to that's been touring in Music City, has probably toured around and they've seen the statue of Chad Atkins downtown. They've seen the uh the statue of Owen Bradley at the head of Music Row. Those people, you and I know them as A-list players or the A-team, right? There's a handful of musicians from the union. And I don't know what the number might be. It might be 12, it might be 20, but it dates all the way back to the Kwanzeta, you know, which again, if you tour Nashville, you probably saw the Kwanzedai, because you can tour that. And the Bradley brothers, Owen and Harold, who was once the president of AF of M for many years, those were the first A-list players. They played with Elvis and Patsy Klein. They were a little members of the American Federation of Musicians. So it's not some esoteric group. And even now, the AF of M president here in Nashville is a good buddy with ours, for full disclosure, David Pomeroy, right? And David is an A-list picker. He he plays the upright bass.
SPEAKER_03So that sorry, go ahead. Well, I was just going to say what he people don't always recognize uh the general consumer. When they hear a recording, I was they're hearing the singer, and it may be identified to a particular artist or a band. But underneath that are the people who end up really putting the polish, which are the musicians. People re remember, unless you're a band and you remember the leave rebird.
SPEAKER_01Yeah.
SPEAKER_03But most of these session players make or break a lot of these records, if you will, because of what they're playing with what they've done with that. And these guys don't get royalty per se. They do not. They're not tied into the record company that we that way. They get paid a rate for a session. Called a day rate. I'm sorry. Called a day rate. A day rate. And then over time, of course, there are contributions made from the labels for the sales of those recordings that goes with the Health and Welfare Pension Fund, AFM. But they're but the players themselves aren't getting ongoing boil.
SPEAKER_02Yeah, and they're not the people we know, you know, they're they're not the face of the label, they're not the face of the music, but they are the Nashville sound. And if you if you like country music, if you listen to country music, you've heard every one of these guys. And that brings us to today's hot take. It's it's a it's about this federal lawsuit we've been sort of hinting at that was filed on June 5th, just last, a month before last, in the Southern District of New York by the Musicians Union. So my guess is it was brought by the New York chapter of the AF of M, but I imagine David Pomeroy had a hand or two in there as well. And it's it's brought against two of the three major label groups, Warner Music Group and Universal Music Group. And here's the twist that that makes it at least interesting in the context of what we've been talking about with AI. They're not suing the AI company, but they're suing the labels for the settlement that they undertook in another case with AI.
SPEAKER_03Dennis, what's uh what's that all about? So back in 2024, Universal Warren's uh Augusoni did sue Suno and UDO for copyright infringement because they were ingesting recordings into their system to train their AI model. And in those complaints, interestingly enough, the label said, and this was quoting from that, that the AI tools were, quote, replacing the work of human artists with massive quantities of AI created sounds that substantially dilute the royalty pools paid out to artists. End quote. So back then, the labels were obviously the good guys. They were they were on the side of angels. They were. And I let me go on record as saying, and I've because I say it quite frequently, I love labels. I used to work at a label, I love indie artists, so it's not this isn't about labels, this is about what's fair. And so back then they were arguing for the creatives, for the artists, and which was fantastic. But but now, now when they may have to pay, you know, and and by the way, when they won that suit last year, or I should say they they settled the suit, it it was for both the past infringement, but then it was also for future for future use.
SPEAKER_02Correct. And let me make sure, because what you're talking about is essentially a pivot on the part of the record labels. In 2024, they're in the court screaming that Suno and UDO, they've they've infringed, they've stripmined our artist work, but by the end of 2025, they've cut a deal to hand the catalogs over to those same people for money. And and the AF of M's point is, of course, where's the cut for our musician, right? When when you use this outside the scope of what we've agreed to, and usually in those situations, it's a master use license, right? That between the union and the label. And that means if you're going to use it and commercially exploit it and distribute a certain number of copies, you got to pay our musicians this day rate. But if you use it for some other purpose, then well, you haven't paid us for that use yet.
SPEAKER_03Correct. So the collective bargaining agreement does provide for some of those types of things. And when you read through the complaint and then read through the motion to dismiss, it it breaks it down into what several of those uses are. And I know in the complaint, they really drill down into, I think it was section 21 of the collective bargaining agreement, which has multiple subsections in it. But what they get into in those subsections are if you use the recording for an identified use that they have in under 21, then you pay what the rate would be for that. So as an example, film. If you're using the master recording in a film for a sync license, if you will, then you're going to pay the musician's fee that you would have paid under the film agreement that AFM has with the film industry. Right. And so it sort of kept everything on par. You know, hey, uh, yeah, I've played it once, but you're using my work in a different use, and we've set an hour rate for that different use already, and that's what you're going to pay. And but then there's this area called new uses and oh new media. It's a little ambiguous, a little broad, uh, if you will, but at least in that regard of identifying uses and and payments, there is a structure set up for this, and and one of the things we'll talk about in a moment with some of the arguments from the labels is that as it relates to AI, there was not a specified rate for AI.
SPEAKER_01Or for the say AI use for for these generative AI trainings, that type of thing.
SPEAKER_03That's part of their argument. But we'll get into that here in just a moment. But new uses are in in the collective bargaining, but they do they do define. They're define uses.
SPEAKER_02And here's why, Dennis, and this this goes back to that A-Team idea, right? You got drummers like Buddy Harmon, one of the most famous and most listened-to drummers, unknown drummers, let's say, in the world. You got Pig Hargis, who I've used on projects. He's deceased now, but but Pig Hargis was a master on the on the piano. And then you have, of course, as we mentioned earlier, Chad Atkins and Harold Bradley, who were great pickers, and and they have certain sounds. And here's the problem when it comes to AI. And this is what the labels were supporting back a year ago, but now seem to have kind of swept under the rug. The A-team plays on probably 90, 95% of all the recordings that come out of Music City. And so even though a listener may not know Pig Hargis' name, they've probably heard his tinkling on the the keyboard many times, and they've heard Chad Akin.
SPEAKER_03Can we change that word? Because that may he wasn't urinating though. Not that. Oh, he thinks Dad Joe guy.
SPEAKER_02We get it.
SPEAKER_03Where am I uh so as you said that then my my head went, oh, okay, that's not what we mean. You mean less, but it might work as some rock shit.
SPEAKER_02Yeah, okay. So so let's change it to playing on the keyboard. How about that? But but anyway, there are countless records, and when when AI comes in, and this is this is where the rub is, and this is true with books as well, or or any other creative art, because AI doesn't distinguish. It goes out, and particularly an open source AI like Claude or Anthropic or or Meta, it goes out and captures things that are on the internet, any kind of information. And here's what the GEMA court noted that is important, I think, in this union argument. It noted that artificial intelligence learning language models don't just process information, as most people believe. It just takes the information and looks for patterns and things of that nature. Well, what the prosecuting attorneys crew in the gimmick is that AI can reproduce the whole song. And the court said, well, okay, that means something different. You're not just processing now, you're memorizing the song. In other words, you're replicating it. And what do we call a replication without a license? That's infringement. And that's what the court said. So now, when you ingest the sounds of the 18, right? You ingest the finger picking of Ched Atkins or the finger picking of Harold Bradley or name any musician in what they do. They each ingest a little bit of themselves into that recording, and they all have unique sounds. And one of them ingests that whole thing, and then a user comes along with anthropic and types into Claude, you know, I know that Claude doesn't do this, but Suno types into Suno and says, play me your or make a country melody for me that goes with these lyrics, and I want it to sound like this song. What does it do? It goes out and captures that finger picking, it goes out and captures that sound. And you and I sitting here listening, we might be able to identify which picker or which person played that original melody, and that is incorporated into that so ostensibly new melody.
SPEAKER_01So you're more of a techie than I am. And and so you and you've been a techie for a long time.
SPEAKER_03So from the beginning. Here's my question. Yeah. So using we'll just use the AFM 18 A-list page. Right. Right, limited number, at most a dozen. Right. So what I hear you saying is it's entirely possible that when AI goes out and trains itself capturing the because there's such a high preponderance of those players with their particular style showing up on all this source material they're accessing, it's highly probable. That they just replicate that that play. Because that's what they're point, right? It it's from in one sense, you go, well, hey, it's all these recordings. Yeah. It's a very finite number of players with particular style.
SPEAKER_02Well, and and then that's and that's the point, right? It does use pattern and patterning and and tries to figure out, okay, when when he says, I want a country melody, the user says, I want a country melody, what does it mean? Well, let me look at all these hundreds of records I've got from Nashville. Well, country music. And that's where your point is made. That it focuses in on those players and says, okay, well, this is what country sounds like. Here's your new melody. And it's using those recordings. That's important to realize. And and and that's in my mind, what they're arguing here. That that's a new use. Because you're actually training your model, you're actually using our recording. And that's what the GimmaCourt said. And the GimmaCourt said that's not just processing of data, that is a copying of song. Because if the AI model can produce the entire song, which they made it do in for like eight or nine different songs in in the German court, it can do that. That's copying and that's duplication.
SPEAKER_03That was the thing that really raised my eyes, eyebrows, when they actually replicate it's something else. And I was like, whoa, that's that's A, it's scary on the one hand, and B, pretty clear. Well, it's pretty telling.
SPEAKER_02Right. So it kind of defeats that argument that the AI companies, the tech companies have been making all along. No, no, no, no. We we're not we're not using the entire thing, we're just processing it as data.
SPEAKER_03BS. Well, an interesting aside to that, and it just now dawned on me. We've talked about it before, and I think we're somewhere in the near future going to be talking about it again with the plaintiff in the case. The Cat Von D. So Gemma, the Gemma court, I call it that, in Germany, is identifying this. When you look at a Cat Von D, getting back to copyright and fair use issues, right? Having a having a photo of herself with a photo of Miles Davis, that holding the photo quote that, and she's traced it out on the guy's arm, and now she's coloring it in. And and the the uh trial court initially found uh Esford.
SPEAKER_02Well, pardon me, but that was a jury. That's not the point, right? And and by the way, that case does kind of indicate how American courts have tended to begin to side on the fair use thing. Because let's face it, people don't really understand fair use.
SPEAKER_03They don't. It's it's it's courts don't understand it. And there's a lot of without a doubt, there's there's a lot of area in there for the court to work within, you know, because it's everything from the commercial impact to how much did you use? Well, how much does you use depending upon what the use was and what like there's no bright line standards.
SPEAKER_02And then when you start talking about tech versus creative, that's a whole nother issue. I mean, maybe we'll do another episode on this, but I that is a good point. The the courts even don't understand fair use sometimes. So so let's walk everybody through the legal hook here because it's important to point out again that this isn't a copyright claim, it's a breach of contract claim. And here's where I love the law, Dennis. You know, if you can't do it with copyright, you can go find a way with breach of contract. Of contract. Isn't that great?
SPEAKER_03It is. It's it it's the thing that my wife gets most frustrated with me about because this is a classic example of it. Was that right or wrong? Well, it depends. Are we talking copyright with copy and con contract? Well, the law is all gray area, isn't it? You know, there is no black and white in the law. And I I'll never forget one of the first lectures in law school. Someone brought up a question. Professor said, stop thinking that the law is fair. The law is the law. No one says the law's fair. Yeah. I think that's the ultimate intent, but no one said no. The law isn't fair. The law's the law.
SPEAKER_02Well, and even when you talk about justice, you know, that that that's a the a sense of fairness. But really, like you say, the law is the law. And we lawyers interpret it in different ways.
SPEAKER_03We have jobs. That's why. Exactly. So how many students said, I just want a black and white? Well, then you don't want to be a lawyer because if it was just black and white, they won't need lawyer. Exactly. So so what is the AF of M uh arguing here? So they're arguing two things under their contract. One is that, first of all, there has to be a notice given that this use is going to happen. And they weren't provided any notices. It was just done. And I read about it by talking about the settlement. Talking about the settlement. And then the second piece is they're supposed to be compensated under certain or certain use.
SPEAKER_02And that's the Article 21 of the collective bargaining agreement you were talking about, right? And so define a new use for our fellow deal makers out there. I I we may have referenced it, but why why is that so critical?
SPEAKER_03Well you talked about that day rate. Yeah. And so the the idea behind it is that if you're contracted for a certain contracted to render service, to render services for a particular item a negotiated point for what your services are and for what you're going to get paid. And so you render those services. But then after that, if if someone takes the output of your work, let's call it that, and uses it somewhere else, they're now benefiting from previous work without paying compensation to you, without negotiating for it. And without really without, in many cases, probably the right to do some of that stuff. So in the creative world, because a recording by a musician can be used in so many different ways, we had issues in this town, even where signatories to the to the union are using pre-recorded masters and creating stems from them that their artists then use for live performance.
SPEAKER_02Which is a different rate. It's a different under the American Federal Race. And so it's cutting out the union there.
SPEAKER_03And and you're getting the benefits of their previous work without the potentially without compensation, where you should have hired a player. If you want a fiddle player on your in your band to play that particular part, hire fiddle player.
SPEAKER_02Well, one of the and one of the important components of what you just said is that that we're talking about the benefit of the bargain in contract terms, right? And the benefit of the bargain for the musicians is that they get a stated day rate to perform their services, which they should, right? And it's set out in the agreement, and the labels negotiate that, and the union negotiates that. What is the consideration the label's getting? Well, when a union musician goes into a studio that is union authorized, and the label has negotiated with that union, the label is getting a work made for hire in that sound article. They are getting significant consideration for in exchange for the fact that we're not going to use this for any other purpose other than selling this recording. We're not going to use it for performances, like you mentioned. Or we're not going to use it for sync license. If we do that, that's outside the scope of what you were paid for and what the benefit of the bargain was. So we need either a new bargain or considered a new year. Correct. Is that the sum of it?
SPEAKER_03That's the sum of it, right there. And and again, as we said earlier, keep in mind, these players, these musicians, are getting paid a one-time flat fee, other than there are some future companies to their yeah. But that's it. And like an artist getting royalties ongoing, labels getting royalties ongoing. And now with digital, the long tail, as they used to call it, is never ending, you know, and you paid your guitar player or your drummer uh one.
SPEAKER_01Correct.
SPEAKER_02Correct. And and and and that's just speaking of fair, that's not fair. That's not just. And here we're not talking about the law. So we can take this out of that previous conversation we had because we're talking about a contract.
SPEAKER_03Yeah, we we are. I will say this, having worked with label, so we could the economics of you know, it's the margins are really thin. People don't think that they think labels were making these big ogres making all this scads of money. They nine out of ten albums, we still talk in terms of albums, are not profitable, right? It is very expensive to create great record. These players and session fees and producer costs are all very expensive to do, and you don't know if it's going to be a hit or not. You hope that it will be. So you've got a lot of these sunk costs going out, and literally one out of ten albums is carrying the weight, all those other nine that aren't profitable. So there's an issue there, and and there is understand that.
SPEAKER_02But you have to remember that the cost of doing business is is not an excuse for infringing, right? You you have to get it all done. You have to get the license done, you have to have the union agreement and all.
SPEAKER_03Well, that's where I was headed, though, with just the the rates for these players, you know, one-time fee. And and you know, three hour, I forget the current rate right now, but the three-hour rate is less than 400.
SPEAKER_02Yeah, it's it's not a it's not and a lot of time they they're in there longer than the stated hours, you know, three to four hours. And 400 bucks, let's face it, uh to you know, you gotta play a lot of sessions to make a good living. And and so that's the situation those those musicians are in. And the union fights for that. So, so let's let's talk about what happens in almost every lawsuit, right? The the label has now filed a motion to dismiss. And I think I think uh response to that or our opening briefs, I think, are due tomorrow, the 14th of August. So tell us about that motion to dismiss. I know you've been digging into that.
SPEAKER_03Yeah, they actually have some real good arguments to be quiet because of the way A, the collective bargaining agreement is written, and B, some concessions, emissions the attorney made at a uh what's called a pre-motion conference on the record in front of the judge.
unknownYeah.
SPEAKER_03And so basically, what the labels are arguing, first of all, is there is actually no contract clause that covers this youth here. It's just silent on that. There's nothing that says here's what you do with it. There's nothing that says you can't do it. And on top of that, there is no negotiated rate for that.
SPEAKER_02And it's not defined new use. And and so, and what does that mean, defined new use? Tell tell the read the listener a little bit about Yeah.
SPEAKER_03So in in section 21 of the collective bargaining agreement, it has multiple subsections. I don't know, my A through F, A through G, like that. And within that, it basically says these are the considered uses that will be considered a new use for a record. And in addition to that, it ties into language that says if it's used for this use, the initial use was recording for the album, and now you want to use that. I go back to the film and now you want to use that recording in a film as is, if you will. Then the contract says, okay, that's a defined new use, you're taking the recording, putting it in a film, and then the contract says, so under that, you have to then look at the the film rate, the rate for the film rate, right, which is a separate agreement.
SPEAKER_02So, in other words, uh the what the labels are arguing is that when there's a new use, you have to be able to convert it to another negotiated rate. If it's sound recording, then and and they're using it for a movie, then we convert it to the movie rate. And so they're arguing it's not an open-ended royalty provision. It's a pretty clever, clever argument. I got to give them credit.
SPEAKER_03But when you think about it, you think, but what are material terms in a contract? And oftentimes price, the rate, is the material term, one of the material terms, right? Right. Right. So even they're saying, even if you say, well, it's a new use, okay. Well, we don't have a definition for AI training to be a new use. But even to want to go there, there's no negotiated rate that we can even point to.
SPEAKER_02Well, and uh isn't Warner also adding a little bit of a twist to this that some some sort of timing argument.
SPEAKER_03Isn't it saying they're currently in active negotiation? That was the other part. Right. That's one of the reasons they want this dismissed, that there's actually been proposals gone back and forth. So, like, why are we even why are we here? We're in the process of negotiating this. But one of the things, and this may be fatal to the union's arguments on this suit and may lead them to just deciding to withdraw it. They're their own attorney. Well, for first of all, let me start with the complaint. And the First Amendment complaint is called. They actually admit that you using sound recordings and generative AI, quote, is is not a purpose covered by our collective bargaining agreement. So it's not even in there. And they admit that, hey, not there. We admit that's not there. But then their attorney gets up in the pre-motion conference with the judge on the record and says, this one got me, said it out loud, quote, there is no rate in the collective bargaining agreement for AI use, and there is no underlying agreement for AI use. We conceded. So it's like, well, then what are we arguing for? You're already saying that there's nothing in the contract that deals with this. And you marry that with what you just said a moment ago. They already have proposals going back and forth to do this, to figure out a way to handle and and negotiate this rate.
SPEAKER_02So well, if that's the case, that that gives me the question why didn't the labels go back to them before settling with AI? Because that's that's really another part of their grievance here, is that you didn't give us notice. You didn't give us the opportunity. Yeah, we might be negotiating, but we all know negotiations are not contracts. So why didn't you give us notice? I mean, that that to me is perhaps the saving grace to this faux pas of the that's true, of the lawyer.
SPEAKER_03Yeah, that is true. It's I I've just really come in my advanced years here that we're not at all practicable, call it that way. Transparency and notice, giving people a heads up, more often than not works out better for everybody. Yeah, there's strategic purposes when you won't do certain things, but a part of me is I'm sitting there thinking, hey, if I'm a label negotiating this copyright issue, shouldn't we also talk with our other partners over here to that?
SPEAKER_02You know what we're doing? And honestly, I think they probably overlook it. And here's my take on the motion. I I'll give the labels a lot of credit. This no-rate, no-breach argument is genuinely clever. And uh it is a little bit of a faux pas for the lawyer to admit that there is no rate. But but I think actually it comes close to proving the union's point. If the contract truly never set a rate for feeding a master into an AI training model, then that's almost the very definition of a new use. So if you look at the intent of the agreement, the new rule wasn't written to say if we didn't price it, you don't get anything. The the intent of that clause is that if there's a new use, we got to figure out what to pay you. So it actually proves that Article 21 should apply here in my mind.
SPEAKER_03Well, I think you're right. There's also a term in in Article 21 that talks about when from it the various new uses. One of the new uses is new media. There you go. Now it's under that's kitchen sink. Exactly. So that's where I think uh the the the union is hey, we've already got new media in here. This AI training module idea is new media. We know right, right. Yeah, we don't have a rate. Okay, well, let's figure out what the rate is, guys, but you you can't not pay us. And now what we don't know, and I don't know, I don't know what kind of and what the extent the behind the scenes conversations were leading up to this lawsuit. Uh but it does sound like the labels were digging in their heels on some things, and the union said, well, fine, what's it got to see?
SPEAKER_02Yeah, I I think that's probably what happened. And and let's face it, you know, and we both agreed this rate conversion argument, it's a real one, and it's gonna get briefed, you know, the heck out of it. But the the the clause can't function, so the case is over. You know, the motion to dismiss, I think that's a heavy lift for the labels at this stage. I'd expect it to survive uh beyond the motion to dismiss. And then we're gonna get back to those, you know, arguments. And so when the briefs come in tomorrow, we're we're recording this audience, by the way, on Thursday the 13th. So tomorrow is when the briefs are are due, and and and so they'll be arguing this within the next month, and we'll certainly be on the horn giving you a gavel drop when that happens. But but this is why I wanted to pair it with the gavel drop that I did with the GEMA case, because GEMA is in Munich, and and as we pointed out, it's a copyright case. It's about the composition and the recording. And it attacks the AI company because on the outside the model memorized the songs and then hands back a copy. So the Gemma court said that's infringing. That's a win for songwriters, it's a win for creators, it's a win even for the musicians. Now, the AF of M case is solely about the musicians here in the U.S. It doesn't touch the AI companies at all. It goes after the labels on the input side, not the output side. You license our members' performances, and it's used in the training to be used in the training, and you didn't pay us for it. Different plane is different defendants, different bodies of law, but it's the same moral spine, right? We're talking about copies of the music and getting paid for copies of the music, whether that be a performance by a union member or a performance of a musical composition. And it's being reproduced in AI, as we talked about earlier. And it's you've been used for a purpose that doesn't involve the human and the people who actually make the music. It's not just looking for patterns, it's it's making wholesale copies. And that's infringement in in any language, I think, whether it's German or Southern.
SPEAKER_03Well, I I wholeheartedly agree. I I really do. It's it's it's a core deeply held belief that I have. I mean, I've we all got into this business not because of the corporate side of things. We got into it because of the creator. And because of the love of the creator. That's right. And they need to be compensated well for their work and and all those things that that come into play here. The lawyer part of me goes, hey, this is an interesting fight. You know, the the I think the labels have really good arguments. I don't know that it'll survive motion to dismiss. I think it I I do think that the court will stay any decisions while negotiations are going on.
SPEAKER_02I think that's a possibility, but I think I think it'll rule on the motion to dismiss. And I think it will not grant it and will not pare this down. And then I think the union and the label will get a little bit more aggressive about the deal they've already.
SPEAKER_03It's not getting it done. Yeah, you we talk about this quite often uh in the cases that we have, the litigation cases we have. The courts really one want to make sure that the the plaintiff has has their day in court to present their grievance. Right. They really don't want to limit that if they can. At the same time, they also want these things to not get to court. Work it out yourselves outside of the court if you can. So you're probably right that that the motion to dismiss will probably be denied, you know, to so that the union has chance to, you know, air its creep if they're working for it if they need to. But I do think that there's going to be a fair amount of time given to them to to come to a deal.
SPEAKER_02Well, my prediction is, yeah, it doesn't go the distance and and go to trial, let's hope. And speaking of that, one of the issues I think raised in the motion to dismiss was the arbitration that that there should be an arbitration clause and and there's not. Is that is that correct?
SPEAKER_03Well, it wasn't one of the arguments that that were brought out initially in there. And I mean, I went through it and there were basically five arguments, none of which dealt with that particular clause itself. Part of what I think was happening, and and I haven't read the full like the bargaining agreement, but we've talked about jurisdiction earlier and why it was in seven districts of New York. I do think that's because, first of all, all three of these majors have headquarters in New York. Number one, but there's probably a choice of law line in there. You know, even if it was arbitration, they're going to pick a choice of laws. That's probably why they wouldn't care.
SPEAKER_02Yeah, no, definitely. I think they went to New York because of that. So well, any other thoughts for the for the for our audience?
SPEAKER_03Not at the moment. I I think I think the people who listen to our podcast, whether they're lawyers at at any level, whether they're in the entertainment business, or whether they're just consumers interested in it. If you're in the arts, I think we have to always pay attention to the arts don't exist without the artist, without the creator. And I would put musicians into that camp as well. We don't have that. We don't have an industry, we don't have a corporation, right? So we have to do things that that detects that uh as best we can. And that's why I think in in cases like this and even dealing with some of the copyright infringement cases, like you were dealing with the last couple of mic drops, it's it's incredibly important to have them protect. And on the infringement side, you know, the labels and the publishers, they obviously have a vested interest in protecting what they have rights to, what they've negotiated rights for. So I think you, you know, we have to protect these things best we can.
SPEAKER_02I agree. I agree. And that, you know, and this is the year of the fight. Uh, you know, a lot and one of the biggest questions I get in in recent years since Claude and ChatGPT came along how is this going to affect the music industry? How is this going to do it? And and and folks, right now is when this is happening. That's why to me it was so important to tie this into GEMA, because Munich was just round one. There's a big case in Boston that is coming up, and it's against Suno, and it's the labels. And it is going to raise all of these same issues. And that's going to be the this union suit, maybe we'll call that round two, but it's just one of the first of the test because what's happening is the zeitgeist for me. The, the, the thought, the public thought about whether these creators you just talked about get their just desserts. And and so this is this case is just the penultimate case. The pinnacle is coming up soon. Now, as far as that Boston case goes, it's been pushed out to 2027. It's not even in discovery as of yet. And the deadline for dispositive motions, which for our audience is a motion that can dispose of the case, a motion to dismiss, a summary judgment motion, that's not even until April. So we're not going to see any decisions there before some Summer of next year. Maybe a settlement, who knows? But that's where these kind of cases that happen all over the world and the tenor of what's happening matters, right? So bookmark our YouTube channel, bookmark our our our podcast, and we'll let you know when things start happening. So let me let me just leave this with questions, not to be answered today. Okay. You always have to give that caveat with me now.
SPEAKER_03So not to be answered today, because this is a longer discussion, and we don't really know some of these answers anyway. So on the one hand, looking at the Boston caveat.
SPEAKER_01Right. It's the labels against Suno. And and most, if not all, American Rick recording a dream is for Rick Recording Artists.
SPEAKER_03They have a clause in there that says if if we get an advance as a label or a catalogue, you as an artist, you don't get part of it. So that's gonna be interesting to look at. Okay, they're gonna go into this deal. Let's assume they work out some sort of a settlement, and there's a big advance, you know, Suno pays them or whatever. These artists aren't gonna see that money. Well, yeah, yeah, that's gonna be round four. Then you know, that's that's coming up after 2027. So that's your right. It did my mind lost me. There was another part to that that I was gonna mention that, and I've totally zoned out on it because I got so fixated on man, you know, how many contracts have I seen and even worked on? We say, okay, that's yeah, I get it, I don't like it, but but the label's gonna do it, okay, you know. Well, we're gonna be an accounting nightmare on top of that, because if you get an old, you know, you get a label that's now 70, 80 years old or longer, right? Thousands, if not millions. If not the accounting on that, and it'd be small checks.
SPEAKER_02Um it would be small checks, but you know, again, it all goes back to that basic prem premise. Uh a human created, and a human has a right to receive confidence. No, agreed. So, folks, that's our show for today. We appreciate you. We'd love to hear from you. Leave your suggestions at 877-7 DealMakers or email questions at questions at musicroll.com. Show Dennis and me a little bit of love on social media, spreads us around. Uh, hit subscribe, hit share. Make and read about our firm when you can. Oh, well, yeah, if you like it, you know, please. You find out more about me and Dennis at stromdisney.com. And you'll find all of our past episodes, including on the gobble drop series, at musicrolldealmakers.com or on YouTube.
SPEAKER_03Thanks for listening. Thank you. The only thing I'd want to add, this is my first time on the video portion of our podcast. Well, you look good. Let us let us know if I brought any eye candy to the party.
SPEAKER_02Yeah, yeah, and and let us know if the shine was too much. Have a good one.
SPEAKER_00Music Row Dealmakers is a production of Drum Disney and Associates. Recorded on location on Music Row, the heart of Music City, Nashville. Subscribe to future episodes wherever you enjoy your podcasts.
