Pandora Suing ASCAP For Lower Licensing Fees

Pandora
has taken performance rights organization ASCAP to federal court in hopes of paying
lower rates for the performance of ASCAP songwriters and composers’ works. The lawsuit
comes after the two sides failed to reach an agreement on lower music licensing
fees together, as Pandora found it difficult to reach profitability with the
current payout structure. The Oakland, California-based company is now calling
on federal courts to set more “reasonable” rates for the licensing fees it
needs to pay out in order to stream ASCAP members’ compositions.

In a
report published by Bloomberg, Pandora is said to be actively seeking a blanket-licensing
fee that would cover every song represented by all 435,000 members of ASCAP.
Back in 2005, Pandora reached an “experimental” fee agreement with ASCAP that
lasted until 2010, although the terms of the arrangement established since then
were not disclosed in the filing.

“The
license rates and other material terms of the 2005 license agreement were
presented to Pandora by ASCAP as being effectively non-negotiable,” Pandora’s court
papers read. The company also said that the before mentioned “experimental”
license agreement was “ill-suited and not reasonable” to begin with.

"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," said a Pandora spokesperson to Billboard. "As a result,
we are initiating the process that has been in place for decades to resolve
royalty disputes with ASCAP."

David
Israelite, president of the National Music Publishers Association (NMPA),
doesn’t seem to agree with Pandora’s decision to sue ASCAP:

“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,” Israelite said in
a statement. “To file this suit at the same time that Pandora’s founders are
pocketing millions for themselves adds insult to injury.”

In
any event, the lawsuit doesn’t reflect to well on the side of artists’
interests for the company, which reported $338 million in revenue last year
alone, a market cap of approximately $1.6 billion, and a user base of 150 million
registered users in the United States.

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Hisham Dahud is a Senior Analyst for Hypebot.com. Additionally, he is the head of Business Development for Fame House and an independent musician. Follow him on Twitter: @HishamDahud