Backdraft: 12 Years Later, UMG Discloses Specifics on Works Lost in 2008 Vault Fire

Backdraft: 12 Years Later, UMG Discloses Specifics on Works Lost in 2008 Vault Fire

The fallout from a 2008 Universal Music Group (“UMG”) vault fire continues to develop, opening up interesting questions about artists’ rights and where they begin and end in relation to the destruction of master recordings. In a February 13th filing regarding a motion to compel discovery, UMG publicly disclosed for the first time particulars of master tapes that were actually lost or damaged during the fire on the lot of its parent company at the time, NBCUniversal (NBCU). UMG’s disclosure of 19 artists with works confirmed to be either lost or damaged in the fire has led to accusations of dishonesty as UMG had previously placed the number of potentially affected artists at around 17,000. At contention here is the fact that while UMG had previously claimed large numbers in relation to the assets lost or damaged, presumably to secure a large settlement sum, none of the settlement money was shared back to the artists whose works were claimed by UMG.

In June 2019, a group of artists including Soundgarden and the estate of Tupac Shakur filed a First Amended Class Action Complaint (FAC), alleging that UMG was negligent in breaching its duty to properly store and care for the irreplaceable master recordings in which the plaintiffs had a reversionary interest, as well as in failing to notify the artists if and when any damage had occurred to their musical works (see the factual and procedural background here). Other causes of action raised in the FAC include breach of contract and conversion for failing to share the funds secured in the prior litigation and insurance settlements. Lawyers for the plaintiff artists asked UMG to provide “a complete inventory of all master recordings, including finished sound recordings as well as outtakes, that were destroyed in the fire”, arguing that UMG had continually failed to inform the plaintiff artists whether any of their musical works were on the tapes that were lost. UMG was ultimately unsuccessful in fighting discovery over the course of 2019, and in December of last year, the plaintiff’s motion to compel discovery was granted.

While this latest filing does not make clear whether any of the artists involved had actual ownership over the physical master tapes themselves, the loss of the high-quality audio contained within them translates into a potential loss of revenue for artists in an era of digital remasters and re-releases. Although the ownership of the destroyed master tapes may have been out of the hands of the artists at the time of the fire, copyright termination provisions mean that at some point, ownership of the physical tapes could revert to the artists. The destruction of these tapes would mean the loss of opportunities for future commercial exploitation for those artists affected.

The February 13th filing describes a confidential settlement agreement between UMG and NBCU, as well as an insurer (AXA) following the fire. The filing alleges that “in 2010, then-counsel for UMG wrote a letter to NBCU stating, in relation to one of the two prior disputes at issue here, that UMG had conducted a ‘substantial investigation of the assets lost in the fire,’ that the investigation found ‘UMG lost more than 118,000 original music recordings dating back decades’”. The filing further states that “there were nearly 17,000 unique artist names on the list of purportedly lost original music recordings UMG provided to NBCU and AXA when UMG sought to and did monetize those recordings”, a number which stands in contrast to the 19 artists disclosed by UMG in regards to the case at hand. The artist plaintiffs allege that while UMG valued these litigation and insurance claims at $150 million USD, it did not share any of the money it recouped with the artists whose works were involved in the claim.

UMG’s response rests on the distinction between potentially and actually lost works: “Plaintiffs misleadingly suggest that the investigation undertaken in the immediate aftermath of the fire and in the context of the NBCU and AXA litigations definitively identified lost original master recordings, such that inclusion of an artist’s name on then contemporaneous working lists of potentially lost assets indicates the irreplaceable loss of original masters embodying the works of that artist.” UMG argues that in consideration of the fact that the vault’s list of assets was itself destroyed in the fire, the post-fire inventory was nothing more than a working list of potentially destroyed works, and therefore the plaintiffs cannot compare the 17,000 potentially affected artists identified on the post-fire inventory used in prior litigation with the 19 artists UMG has definitively confirmed as actually affected today. UMG further argues that while it has, at an expense of over $1.4 million USD to date, set up a team devoted exclusively to providing information and transparency to potentially affected artists reaching out with questions, to compel UMG to undertake the same process for all 17,000 names on the original working list would place upon the company an undue burden, and would be essentially impossible to complete.

In the age of digitization, some might wonder why the destruction of original, physical master tapes is causing such an uproar when digitized copies of a work can be accessed from any number of sources. Monetary considerations may be driving the litigation that is currently underway, as the plaintiff artists demand a cut of the settlement funds they allege are owed to them via revenue sharing provisions in their contracts with UMG. Further, while digitized copies are most often used to commercially exploit a recording through channels such as tv, radio and streaming, the re-release of digital remasters and offerings by hi-fidelity streaming services have become an additional source of revenue for artists and labels alike as playback technology continues to improve. However, for audiophiles, the destruction of these high-quality master tapes goes beyond economic loss. The destruction of the master tape is an irretrievable loss of music and sound that, especially in the instance of many early recordings, we’re only now developing the listening technology to hear.

This case draws our attention to the changing digital media landscape and the complicated relationship between physical and intellectual property in such an environment. For those interested in the modernization of the music industry in a digital world, this case offers food for thought. For now, the parties await a response to UMG’s motion to dismiss the plaintiff artists’ FAC.

Meghan Carlin is a first-year student at Osgoode Hall Law School. With her time spent working in music licensing for film and television informing her legal studies, Meghan also acts as a 1L rep for the Osgoode Entertainment and Sports Law Association.