Pandora Prevails In ASCAP Rate Court Case

The New York ASCAP rate court has come down in favor of Pandora in a ruling that says that the performance right organization blanket license has to include all of its repertoire.

That means that the all the publishers who have pulled their digital rights from the performance rights organization -- i.e., Universal Music Group, and BMG, except Sony/ATV and EMI--will in fact be licensed through the ASCAP license and their separate deals are not in effect, until the Pandora license ends on Dec, 31, 2015.

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As for Sony/ATV, the ruling has an impact on the longterm but does not invalidate its current deal cut directly with Pandora. That deal calls for the music service to pay Sony/ATV its pro rata share of 5% of revenue, and expires at the end of this year. After that, the ruling does impact Sony. If it wants to keep its catalog with ASCAP, it will have to abide by whatever terms the rate court set until the end of the Pandora license.

The judge ruled in Pandora's favor because the consent decree that ASCAP has been operating under since 1941 provides Pandora with a license to play all of the works in its repertory.

Under the consent decree, when a music user such as Pandora requests a license from ASCAP, it immediately gets the right to play ASCAP songs under an interim license while the two sides negotiate the rates. If they can't come to a meeting of the mind, then they turn to the ASCAP Federal rate court which is in the Southern District of new York, to make a determination on fees.

Since ASCAP retains the songs of the publishers that tried to pull digital rights in its reportoire for other music licensees, then it must provide Pandora with a license for all of its catalog, accord to the ruling by Judge Denise Cote, who presided over the ASCAP rate court.

“'All' means all," Judge Cote wrote in her decision. "So whether ASCAP purports to categorize Pandora as an 'applicant' or a 'licensee,' Pandora’s right to perform the compositions in the ASCAP repertory extends to all of ASCAP’s repertory and ASCAP may not narrow that right by denying Pandora the right to play the songs of publishers who have withdrawn new  media licensing rights from certain songs while keeping the songs in ASCAP’s repertory to be licensed for performance by other music users."

The timing of when and what rights publishers pulled out appeared critical to the judge's decision.

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While EMI told ASCAP in September of 2010 of its intention to withdraw all of its songs entirely from ASCAP, it didn't actually withdraw its digital rights, after ASCAP proposed a modified withdrawal, until May 2011. And the rates weren't worked out with Pandora until June 2012. In the meantime, Pandora had terminated its license with ASCAP on Oct. 28, 2010, and asked for a new five-year license beginning Jan. 1, 2011 through Dec. 31, 2015.

When the two sides couldn't reach an agreement, Pandora asked the rate court to make a determination in November 2012.

"We welcome the court's decision," Pandora's assistant general counsel Chris Harrison said in a statement “We hope this will put an end to the attempt by certain ASCAP-member publishers to unfairly and selectively withhold their catalogs from Pandora.”

Now, that the scope of the ASCAP license has been determined, the Judge has set Dec. 4 for the beginning of the rate trial, which will determine what percentage of Pandora advertising revenue will be paid to ASCAP in exchange for its blanket license.

"The Court’s decision to grant summary judgment on this matter has no impact on our fundamental position in this case that songwriters deserve fair pay for their hard work, an issue that the Court has not yet decided," ASCAP CEO John LoFrumento said in a statement.

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"ASCAP looks forward to the Dec. 4 trial, where ASCAP will demonstrate the true value of songwriters’ and composers’ performance rights, a value that Pandora’s music streaming competitors have recognized by negotiating rather than litigating with creators of music."

“Pandora continues to firmly believe that musicians must be fairly compensated for their work," Harrison said. "We are committed to a responsible, sustainable and equitable royalty structure that benefits and grows the entire industry and does not discriminate against new technologies."

If the judge gives a ruling that results in royalty rate payments as large as the separate deals negotiated directly by the large publishers who have completed deals with Pandora, then the ruling is no big deal for the publishers trying to withdraw their digital rights. But if the Judge gives ASCAP/Pandora a lower rate than, it could cost those publishers millions of dollars.

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