Pandora has now signed two new licensing deals with both ASCAP and BMI in a continuation of a strategy seemingly designed to enhance the services interactive capability, prepare it for geographic diversification. Most likely, both.
According to the announcement, the deals allow both ASCAP and BMI to further their goal of delivering "improved" performance royalties for their songwriters and publishers, while Pandora will benefit "from greater rate certainty and the ability to add new flexibility to the company's product offering over time."
"These deals create business benefits for Pandora, while modernizing compensation in the U.S. for ASCAP and BMI songwriters and publishers," according to the announcement, which said the deals were multi-year licensing agreements.
The ASCAP licensing deal with Pandora was set to expire at the end of this year.
"This agreement is good news for music fans and music creators, who are the heart and soul of ASCAP, and a sign of progress in our ongoing push for improved streaming payments for songwriters, composers and music publishers that reflect the immense value of our members’ creative contributions," said ASCAP CEO Elizabeth Matthews in a statement.
In the case of BMI, the deal comes right on top of a court-mandated rate of 2.5 percent of revenue for the BMI blanket license determined earlier this year, which goes through 2016. The new deal supersedes the rate court determination for 2016, the last year of the license. Also as part of the deal, Pandora has agreed to withdraw its appeal, brought in October, of Judge Louis Stanton's May 2015 order in the recent BMI rate case.
"We’re extremely pleased to reach this deal with Pandora that benefits the songwriters, composers and publishers we are privileged to represent," BMI president and CEO Mike O’Neill said in a statement. "Not only is our new agreement comparable to the other direct deals in the marketplace, but it also allows us to amicably conclude our lengthy rate court litigation and focus on what drives each of our businesses -- the music."
Pandora, which had been seen as an antagonist by the music industry despite hundreds of millions of dollars in annual royalty payments to the industry, has switched tactics over recent months and become much more accommodating and artist friendly. The company has struck direct deals with Sony/ATV, SONGS Music Publishing, Downtown Music Publishing, Warner/Chappell, independent label body Merlin, and settled a case that dealt with royalties on music recorded prior to 1972 over the past few months. While the deals do not reveal terms, sources say that Pandora has been agreeing to give publishers their pro-rata share of 10 percent of revenue, up from the 4.1 percent it had been paying, until recent direct deals and the BMI rate court resulted in a Billboard estimated 5.4 percent of revenue for 2014. In addition to those higher rates, the direct deals also saves the music publishing community -- and Pandora itself -- the costly rate court litigation. Moreover, to publishers that cut direct deals it offers a further savings in that the administration deals they cut with the PROs are somewhat less than what they charge publishers under the blanket licenses, sources say.
Universal Music Publishing Group has an existing direct deal with BMI, but the question now becomes whether the ASCAP blanket license includes the UMPG catalog, or will the two -- Pandora and UMPG -- still cut a separate direct deal.
Industry sources say that Pandora is seeking to enhance its custom radio service by adding more interactive capabilities, like possibly replaying songs or offering more chances to skip songs, while also preparing to expand internationally.
In order to move outside of its current territories of the U.S., Australia and New Zealand, Pandora would need to sign direct deals and the majors privately say that they would have insisted that such deals also include the U.S., where Pandora gets rates mandated for sound recording performances by the Copyright Royalty Board. Publishing rates set usually through rate court litigation.
"These collaborative efforts with the leading Performance Rights Organizations, as well as our recent direct deals with several music publishers demonstrate our progress in working together to grow the music ecosystem," said Pandora CEO Brian McAndrews.