Music publishing, online
Pandora has been ordered to increase the royalty rate it pays to U.S. music collection society BMI by 42% after a New York Rate Court decided to raise a royalty rate of 1.75% of annual net revenues to 2.5%. The decision should mean a hike of $7.5m, with payments to BMI to $22.5 million annually. The court ruled that 2.5% was “reasonable, and indeed at the low end of the range of fees of recent licenses.”
BMI’s rate is now significantly higher than the 1.85% Pandora royalty rate secured by ASCAP last year, a rate music publisher Sony/ATV’s CEO & Chairman Martin Bandier slammed as “woefully inadequate” and a “clear defeat for songwriters”. Following the BMI result last week, ASCAP President and Chairman Paul Williams said: “This decision is welcome news for music creators, but make no mistake, Pandora will stop at nothing in their ongoing effort to short change songwriters. “ASCAP and the music community must continue to fight for the urgent reforms needed to enable all songwriters, composers and music publishers to obtain fair compensation for the use of our music.” Pandora currently has to pay 2.5% of its annual revenue to BMI and 1.85% to ASCAP. For its use of sound recordings it has to pay a separate license to artists and labels via SoundExchange: This equates to $0.0014 per ad-funded stream and $0.0024 per premium stream with most presuming the record labels are taking a significantly larger share of the ‘digital pie’ – and with others saying even with this share, the record labels are not passing on a fair share of that income to recording artistes. Jay Z recently commented on this.
BMI President and CEO Mike O’Neill said: “Today is an important day for BMI and a huge victory for the more than 650,000 songwriters, composers and publishers we have the privilege to represent. After a nearly two-year legal battle over the value of the BMI repertoire to the Pandora digital music service, the Rate Court ruled resoundingly in BMI’s favour and concluded that our proposed rate of 2.5% of revenue was “reasonable, and indeed at the low end of the range of fees of recent licenses.” adding “The decision also establishes that existing marketplace agreements can be taken into account when determining rates, a key factor for us, and the industry. This is an important step forward in valuing music in the digital age” and “BMI is also a strong supporter of the Songwriters Equity Act, a bill recently reintroduced in Congress that seeks to create a level playing field when determining rates and fees. These efforts are essential to help modernize the music licensing system, creating one that makes better sense for the digital world we live in today and benefits all stakeholders.”
Pandora is expected to appeal the decision.