Tuesday, November 6, 2012

Pandora Sues Over Unreasonable Online Music Rates

Chloe Albanesius/PC Mag

Internet radio service Pandora today filed suit against the American Society of Composers, Authors and Publishers (ASCAP) over what it considers to be exorbitantly high royalty rates.

As reported by Bloomberg, the company wants the court to impose "reasonable" fees for the right for stream songs governed by ASCAP on Pandora.

"Pandora has been negotiating with ASCAP for over a year. ASCAP continues to seek rates higher than the current rates and above the agreement that they reached earlier this year with all of the major radio groups, which covers both broadcast and Internet radio usage for the majority of our competitors," a Pandora spokeswoman said in a statement. "As a result, we are initiating the process that has been in place for decades to resolve royalty disputes with ASCAP."

Internet radio stations must pay a fee for the right to stream music on their websites. ASCAP represents 435,000 U.S. composers, songwriters, lyricists, and music publishers of every kind of music, according to its website.

As Pandora noted in its Feb. 2011 IPO filing, Pandora terminated its license with ASCAP in Oct. 2010, though ASCAP was required to provide Pandora with content for an undisclosed period. Terms of their deal were not revealed, but Pandora said in its filing today that those terms were "ill-suited and not reasonable," Bloomberg said.

"We pay royalties to the copyright owners both of sound recordings and of the underlying musical works, subject to certain exclusions," Pandora said in a recent regualtory filing. "Under U.S. law, we are guaranteed the right to stream any lawfully released sound recordings."

Whether or not it can afford to do so, however, remains a point of contention. Last month, Pandora chief Tim Westergren penned a blog post that said companies like Pandora pay up to $3 million in annual fees per top artist (Drake, Lil Wayne), while traditional radio stations pay substantially less.

Westergren is not against royalty rates; the few thousand dollars that some artists get from firms like Pandora can mean "the difference between making music an a vocation and a hobby," he wrote. But "since Pandora accounts for just 6.53 percent of all radio listening in the U.S., it seems fundamentally unfair that other forms of radio that represent much larger shares of U.S. radio listening pay substantially less to artists," he said. It's not a business model Pandora can sustain.

This is not a new issue; Pandora has been fighting the battle since at least 2008. In his blog post, Westergren urged Congress to "stop the discrimination against internet radio and allow it to operate on a level playing field, under the same rules as other forms of digital radio."

Congress is currently considering the Internet Radio Fairness Act, but it has not yet been voted out of committee.

ASCAP did not immediately respond to a request for comment. But in a statement, the National Music Publishers' Association (NMPA) said the suit was outrageous.

"It's outrageous Pandora would try to reduce the already nominal amount they pay songwriters and music publishers, when Pandora's business model is based entirely on the creative contributions of those songwriters," said David Israelite, president and CEO of the NMPA. "To file this suit at the same time that Pandora's founders are pocketing millions for themselves adds insult to injury."

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