Pandora Wins In ASCAP's Appeal of Payment Rate

The federal courthouse in Manhattan

The federal courthouse in Manhattan photographed on Oct. 23, 2014 in New York City.

The U.S. Second Circuit Court of Appeals has ruled in favor of Pandora, saying that the 1.85 percent of revenue cost set by the ASCAP v. Pandora rate court is reasonable for all five years of the license; and affirming the ruling by Judge Denise Cote, the ASCAP/Pandora rate court judge, that partial withdrawals of digital rights under the consent decree are not allowed.

ASCAP had appealed the 1.85 percent rate set by Judge Denise Cote for Pandora's license, which is set to expire on Dec. 31 of this year.

"Having reviewed the record and the court’s detailed examination thereof, we conclude that the district court did not commit clear error in its evaluation of the evidence or in its ultimate determination that a 1.85 percent rate was reasonable for the duration of the Pandora?ASCAP license," the Appeals Court, overseen by Judge Leval, Judge Straub and Judge Droney ruled.

"We are pleased that the Second Circuit has affirmed Judge Cote’s ruling, which highlights the anti-competitive harms that can result from a lack of transparency into music ownership," Pandora's director of public affairs Dave Grimaldi said in a statement.

"Powerful corporate interests, like Pandora, are determined to stand in the way of meaningful music licensing reform so that they may continue to shortchange songwriters" wrote ASCAP CEO Elizabeth Matthews in a statement. "This is a wake up call for creators to stand together, get involved and fight for their right to be paid a fair market rate for the use of their works.”

The court also affirmed Judge Cote's legal determination in rejecting the various alternative benchmarks offered by ASCAP, such as the rates negotiated by the withdrawing publishers. Both Sony/ATV Music Publishing and Universal Music Publishing Group withdrew their rights, with sources telling Billboard that the former negotiated a rate with Pandora equivalent to about 2.25 percent in 2013, while the latter negotiated a rate of about 3.34 percent for the second half of 2013. Since those benchmarks are higher than the 1.85 percent rate that the Judge ultimately set, ASCAP, Sony/ATV and UMPG had appealed Judge Cote's decision.

"We likewise conclude that the district court's legal determinations underlying that ultimate conclusion,” including its rejection of various alternative benchmarks proffered by ASCAP, "were sound."