Pandora – BMI spat goes legal

July 2013

Music publishing, Internet


Pandora, the US based digital innovator which has spearheaded the development of online radio services stateside and led the ‘interactive radio’ side of the expanding streaming music market, has bought a good old fashioned FM radio station in South Dakota. The acquisition of KXMZ-FM in Rapid City gives Pandora a seat at the table of the Radio Music Licensing Committee (RMLC) and seemingly would enable it to reduce the royalties it pays to the American music publishers via the music collecting societies, in particular ASCAP, in an escalating row over the ‘favourable’ treatment given to the major US terrestrial broadcasters such as Clear Channel.

And in the wake of this news, and as expected, the other main US music collection society, BMI, has launched legal action against Pandora, asking for a ruling on the rates the streaming music service should reasonably be expected to pay on a blanket license for songs represented by the American royalty collection agency. Pandora has been pushing for a while to reduce its royalty payments to both the record companies and the music publishers, in the former case by lobbying in Washington to reform the statutory licensing system through which American interactive radio services can access sound recording rights, and in the latter case by negotiating with the US music publishing sector’s collecting organisations, mainly ASCAP and BMI. Pandora launched legal action against ASCAP late last year when negotiations failed to go its way.

Billboard reports that BMI filed its lawsuit that after Pandora terminated its licence with the collection agency in October last year, seeking a new agreement: BMI had proposed an increase in fees to Pandora that it felt were consistent with market rates and the growth in popularity of streaming music, and accounted for those music publishers which were withdrawing from the collective licensing system in the digital domain which included Sony who then directly licensed Pandora – but at higher rates than BMI. With regard to Pandora’s call for parity with those RMLC allied broadcasters who now operate online, BMI argues that its deal with those companies – which is based on a similar deal struck between the radio industry body and rival collecting society ASCAP – takes into account the high income the traditional broadcasters provide the music publishers across all of their operations and is not designed to cover an “internet-based music streaming service that happens to own a single radio station in a city with a total population that is less than 0.045% of Pandora’s online membership”. In fact in reaction to Pandora’s acquisition of KXMZ-FM, BMI said the move was “an open and brazen effort to artificially drive down its license fees … for the expressly stated purpose of ‘qualifying for the same RML license under the terms as our competitors'”.

Pandora is further stepping up its legal battle with US collecting society ASCAP by asking the American Courts to rule that music publishers Universal, BMG and Warner/Chappell are obliged to continue licensing their content to the streaming service via the collective licensing system until 31 Dec 2015, when the society’s current obligations to it run out.

In parallel news, at the World Creators Summit in Washington, DC, the US Register of Copyrights, Maria Pallante, confirmed that she’s looking to “provide a full public performance right for sound recordings” in the USA in a move which would see terrestrial radio stations pay to use sound recordings – internet and satellite stations already do – which will cheer record labels and recording artistes and no doubt will be fiercely resisted by traditional radio stations who do not pay to broadcast recorded music.

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