A funny thing happened on the way to the forum where big lawsuits often get decided. On Thursday, a bunch of joke tellers were accused of conspiracy — a price-fixing scheme that allegedly threatens the ability of streamers to access the comedy market. The development comes in an ongoing case that may forever change the laughter business.
Back in February, the estates of the late comedians Robin Williams and George Carlin, as well as living comics Andrew Dice Clay, Nick Di Paolo and Ron White each filed claims against Pandora Media. They’re upset over a lack of any payment to them for the use of old comedy routines. According to the since consolidated lawsuit in California federal court testing never-before-tried copyright theories, jokesters, like songwriters, are entitled to protect the composition of their work from being performed without license. For years, streaming services have ignored joke writers when clearing rights, but that may now change upon charges of mass infringement. “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,” the complaint states. “Later is now.”
Pandora, represented by the firm of Mayer Brown, is now asserting a significant counterclaim against these same comedians and Word Collections, an upstart performance rights organization (PRO) aiming to win royalties for clients. “Word Collections and its co-conspirator comedians have not only engaged in naked horizontal price fixing,” states the counterclaim (read in full here). “In assembling its portfolio of the rights to the works of conspiring comedians, Word Collections also presents a genuine threat of achieving monopoly power in the market for the rights to perform, distribute, and reproduce the comedy routines embodied in comedy recordings, power that it can and will exert over Pandora and other services that offer comedy.”
Although a cartel of comedians might sound like the setup of some bad joke, the truth is that what’s happening now bears resemblance to something that occurred in the mid-20th century when the Department of Justice pursued antitrust claims against song publishers for ganging up in licensing to radio stations. In settling, ASCAP and BMI, two giant PROs in the music business, entered into consent decrees that still operate to this day. As a result, ASCAP and BMI must offer blanket licenses to music users, and whenever there’s a dispute about the terms and conditions, a federal judge figures out what’s fair. So restaurants, bars, sports stadiums, and most other places you hear music over loudspeakers don’t have to negotiate licenses individually with each and every songwriter. They can access a bulk catalog of songs by paying a judicially-reviewed fee to ASCAP and BMI.
Of course, intellectual property is basically a government-approved monopoly (e.g. Disney gets to control the Toy Story market), and so it should come as no surprise that when someone asserts a bold and novel I.P. claim — as these comedians are doing— someone else responds with an antitrust counterclaim, testing whether the government really will tolerate such market manipulation. Especially at the prospect of concerted efforts by owners to raise the value of their works. That’s what we’ve seen in the music industry. Over the years, even after the ASCAP and BMI settlements, there’s been additional antitrust cases over the licensing of songs. Usually, it’s because some new technological way (TV, the internet, ringtones…) to exploit music has come along or because a breakaway group of songwriters and publishers has authorized someone other than ASCAP and BMI to represent them. Most notably, a dispute in the late 1970s over music on television went all the way up to the Supreme Court, which then decided that offering blanket licenses of song catalogs wasn’t presumptively illegal. Nevertheless, litigation has endured in other contexts with the licensors having more difficulty in escaping antitrust claims.
Thanks to this new development in the comedy suit against Pandora, expect to hear much more about the market for laughter as antitrust litigation tends to focus on defining markets and figuring out harms. But if the plaintiffs can convince a judge that the performance of jokes is protected by copyright despite decades of almost no enforcement, we may see a new paradigm emerge for comedy licensing that figures to impact comedians and streamers even beyond the players involved in this particular case. This very much feels like the early stages of something that could become structurally transformative.