Pandora Seeks Lower Fees From ASCAP

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• November 6, 2012

Pandora has filed a lawsuit against ASCAP in an attempt to get lower licensing rates for the performances of ASCAP’s works.

The suit, which was filed in a New York federal court, is asking the court to determine “reasonable fees and terms” for ASCAP licenses through 2015. The parties’ original licensing agreement was made in 2005, and Pandora now claims it is “ill-suited” to Pandora’s business. Since January 1, 2011, Pandora has been paying ASCAP interim licensing fees. The organizations have been negotiating over a year but have not been able to reach a satisfactory final licensing agreement, prompting the lawsuit.

Pandora’s justification in filing the suit comes from the court’s approval of the Radio Music Licensing Committee’s agreement with ASCAP. That agreement blankets traditional broadcasting and internet content (including Pandora competitor iHeartRadio) and offers RMLC members a lower fee.

Additionally, Pandora claims it is due lower rates because of publisher new media licensing withdrawals from ASCAP. Going forward, publishers such as EMI who exercise withdrawal rights will negotiate those licensing fees directly with Pandora and similar companies. Pandora’s agreement with EMI spans two years beginning January 1, 2012.

The publishing community was none too thrilled with the move. “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/CEO of the National Music Publisherss Association in a statement. “To file this suit at the same time that Pandora’s founders are pocketing millions for themselves adds insult to injury.”

The NMPA’s statement elaborates by noting that Pandora’s 2011 revenue was $338 million with a market cap of $1.6 billion.

Added Israelite, “Royalty rates should protect songwriters and compensate them for their significant contribution to the success of music services like Pandora. As this area of the market grows, we need to ensure that songwriters are protected, and that they are appropriately compensated for their work.”

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