Users of Pandora’s Free Service Are Not Customers Under Michigan Privacy Statute, But Questions Remain
After certifying to the Michigan Supreme Court the questions of whether Pandora is in the business of “renting” or “lending” sound recordings, and if the plaintiff (Peter Deacon) is a “customer” of Pandora under the PPPA, the Ninth Circuit adopted the Michigan court’s interpretation that Pandora, through its free, ad-supported service, is not in the business of renting or lending sound recordings and that Deacon is not a customer under the PPPA.
The Michigan court held that Deacon was not a customer because he did not pay for the service, although in a footnote, the court emphasized that one cannot assume that Deacon would be considered a customer had he been paying for Pandora’s ad-free version of the service. The California district court similarly held that Deacon was not a customer under the PPPA due to his not paying for the service, but added the additional nuance that there was no use of Pandora’s property. Pandora’s streaming service, not the user, selects the songs, and the temporary song file is “controlled at all times by Pandora . . . [which] places the file on the subscriber’s computer and Pandora deletes the file when the song is over.” And both the Michigan court and California district court held that no lending occurred because the sound recording was only delivered to Deacon, without a corresponding return.
These decisions, and the Ninth Circuit’s affirmation, leave open many unanswered questions, namely: What if Deacon had been paying for the ad-free version of the service? Would the situation be different had Deacon been utilizing a paid on-demand music service, where he selected the songs (a model Pandora is currently contemplating)? Will another court view the temporary delivery and then automatic deletion of streamed content as lending, in contrast to these decisions?
Listener preference data is a valuable resource to Pandora, to other similarly situated companies, and to the music industry at large. This data can drive the way music is commoditized, consumed and promoted; how concert tours are routed; and the dollar value of recording and publishing agreements for artists and songwriters. Users’ demographic information (even just the gender, age and location), coupled with what they listen to and how often, can be a powerful tool, one that is and will continue to be used by music creators/owners, concert promoters and music users/distributors. How courts answer the questions above could impact the alienability of this valuable data. The highly fact-specific nature of these decisions demonstrate that this will be an important area to watch, with evolving technology and unsettled law.