Warner Music Group (WMG) - ★★ - Ranked #85 in our Q2 2024 Large Cap Equity Rankings
Shares of Warner Music Group (WMG) dropped sharply on Thursday, falling nearly 9% in regular trading after the U.S. Supreme Court ruled in favor of a Miami-based music producer in a long-running copyright case against the company.
The Supreme Court's 6-3 decision allows music producer Sherman Nealy to collect over a decade's worth of damages from Warner Music. Nealy sued a Warner subsidiary in 2018, claiming copyright infringement for using elements of his song "Jam the Box" in the 2008 Flo Rida track "In the Ayer" without proper permission.
Nealy argued that while he was in prison, Warner obtained the rights to his song and then infringed on his copyright by sampling it in "In the Ayer." He sought damages dating back to the song's 2008 release. Initially, a lower court limited Nealy's ability to recover historical damages due to statutes of limitation.
However, an appeals court overturned that decision, stating there was no time limit on damages claims for continuing copyright violations. The Supreme Court upheld the appeals ruling, determining that the Copyright Act allows copyright owners to recover damages for any timely infringement claim, even if the violations occurred years earlier.
The Court's ruling is seen as a significant win for copyright holders in the music industry. But it also exposes companies like Warner to potentially substantial damages for previous copyright infractions. Warner's stock slid nearly 9% on Thursday amid concerns over the financial impacts of the decision.
After the initial drop, Warner shares traded relatively flat in after-hours activity. But the Supreme Court ruling injects new legal and financial uncertainty for one of the world's largest music conglomerates.
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