By: Mary Kate Campbell
Peloton, founded in 2012 and one of the largest and fastest-growing fitness companies, now boasts a community of over two million members. The company is a forerunner in at-home fitness platforms, providing its members with instructor-led classes through an engaging streaming experience. Known for its innovative trifecta of fitness, technology, and personalized equipment, Peloton has disrupted the health industry. But the breakout company’s legal road has not been a smooth ride.
In March of 2019, more than a dozen music publishers filed a music copyright lawsuit against Peloton for using over a thousand songs on their platform without paying for them, seeking $150 million in damages. The publishers accused Peloton of being a “textbook willful infringer” by making music available to their members without paying for synchronization licenses. The publishers are claiming that Peloton created workout classes for their members for over a period of years that unlawfully used mainstream music from artists like Lady Gaga, Katy Perry, Ed Sheeran, Rihanna, Justin Timberlake, and Bruno Mars.
Synchronization rights (“sync rights”) allow a user or company to pair their visual content with copyrighted music. Since Peloton’s classes are designed to combine an instructor’s class with music, it is required to obtain the sync rights directly from the music publisher for each copyrighted song it uses. Historically, movies and TV shows are the most common obtainers of sync rights. However, companies like Peloton have a more complex obstacle to overcome. TV shows and especially movies have a finite number of songs they need to buy the rights to, but Peloton is constantly updating their already wide-ranging music library. Furthermore, there are many songs that have multiple publishers and in order to comply with copyright law, the user must acquire sync rights from all owners. In its countersuit, Peloton recognized this hitch and stated that only 2% of the songs named in the original suit were owned by a singular publisher.
After getting hit with the lawsuit, Peloton responded and announced its intention to remove any videos containing music that it did not have a license to. Nonetheless, in April of 2019 Peloton filed a counterclaim where it accused plaintiffs of acting in “a coordinated effort…to fix prices” and that their conduct “violates the federal antitrust laws and state laws.” Peloton further asserts that the National Music Publishers’ Association (“NMPA”) demanded they pay a blanket licensing fee for millions of songs, and after communication between the two organizations broke down, the NMPA directed publishers to pull their licensing agreements with the fitness empire. Additionally, Peloton argues that sync licensing processes are not compatible with their innovative business model. In January of 2020, the court rejected Peloton’s antitrust claims, holding the allegations failed to identify the “relevant market” harmed by the publishers’ anti-competitive behavior.
On February 27, 2020, the litigation fully settled for an undisclosed amount, and Peloton and the trade association entered into a joint collaboration agreement to work together and revamp Peloton’s music licensing practices. It is evident that current copyright laws and the process to obtain sync rights were not designed to accommodate companies like Peloton, who use a substantial amount of copyrighted music in their content. However, as seen in the judge’s decision to reject Peloton’s countersuit, the court is not yet willing to bend the rules and cater to new-age issues. Plus, music publishers are clearly steadfast in their self-interested pursuit to ensure creators and owners are properly compensated regardless of how original and unique a business may be.
The underlying takeaway is that companies currently wanting to use an extensive music library capable of being regularly updated must be prepared to undergo rigorous and thorough legal processes to secure sync rights for each song. Presently Peloton’s situation is a novel one, therefore I do not think copyright laws are going to change anytime soon to specifically accommodate such business models. Especially since the Music Modernization Act, recently passed in 2018, further protects artists and makes it easier for them to get paid when their music is streamed. For now, the most feasible option is for companies to have transparent negotiations with the NMPA and publishers to settle equitable licensing agreements before lengthy and costly litigation ensues.
Student Bio: Mary Kate Campbell is a second-year law student at Suffolk University Law School and a current staff member on the Journal of High Technology Law. Mary Kate received a Bachelor of Business Administration in Finance from Cleveland State University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
