Pandora's complaint claims the company is entitled to lower fees because ASCAP gave a lower fee to the Radio Music Licensing Committee, which includes competitor iHeartRadio, the Internet radio service of Clear Channel. That deal covers both terrestrial and digital rights.
In addition, Pandora believes it should pay ASCAP a lower rate because some rights holders -- namely Sony/ATV and EMI Music Publishing -- have announced they will withdraw digital rights from ASCAP and will negotiate fees privately. The complaint explains that Pandora reached an agreement with EMI in March that covers January 1, 2012 to December 31, 2013. Pandora does not yet have a deal with Sony/ATV, according to the complaint.
"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," a Pandora spokesperson said in a statement to Billboard.biz. "As a result, we are initiating the process that has been in place for decades to resolve royalty disputes with ASCAP."
A rep for ASCAP said the organization had no comment at present.
The National Music Publishers Association quickly voiced its opposition to the lawsuit. "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," said David Israelite, president and CEO of the NMPA, in a statement.
Israelite went on to say that royalty rates should compensate songwriters for their contribution to the success of popular music services such as Pandora, which the NMPA notes had revenue of $338 million and a market capitalization of nearly $1.6 billion in 2011 (the current market capitalization is $1.42 billion).
Pandora is trying to lower fees for the performance of sound recordings, too. The company is among the companies backing the Internet Radio Fairness Act, a bill that would change the standard by which the Copyright Royalty Board sets the statutory rate for the digital performance of sound recordings. The bill seeks to adopt the 801(b) standard for webcasters, a move supporters believe will result in lower rates that would be closer, in percent of revenue terms, to those paid by satellite radio and cable radio. The current statutory rate will expire in 2015.
Pandora is being represented by Greenberg Traurig, LLP.