On the heels of Sony/ATV and EMI striking their own deals to directly license their music to Pandora, Universal Music Group has also notified ASCAP and BMI that it too will no longer rely on the two performance rights organizations to negotiate digital performance licenses and royalty rates.
In addition, sources say that BMG Chrysalis has also negotiated the option to withhold its digital performance rights from ASCAP and BMI, but it has yet to decide if it will actually use a direct-deal strategy.
Sony/ATV has just completed negotiations with Pandora on its own behalf and for the EMI Music Publishing catalog, which it administers and which, sources say, yielded a 25% increase.
Since Pandora was paying music publishers approximately 4.1% of its revenue, according to a recent regulatory filing, that means Sony achieved a rate of about 5% of Pandora's for licensing its and EMI's songs to the service.
"With the consent decree constraints that apply to both ASCAP and BMI, in our view, it's especially challenging for either society to achieve market rates in negotiations with digital services," Universal Music Publishing Group chairman/CEO Zach Horowitz said in a statement to Billboard. "In order to ensure that our songwriters are fairly compensated, we believe the best approach is for us to negotiate directly with these services."
ASCAP, BMI and SESAC typically represent music publishers on a non-exclusive basis to license performance rights and collect royalties on their behalf. The motivation to do direct deals is driven by the belief that ASCAP and BMI, which operate under consent decrees that they have signed with the U.S. Department of Justice, are hamstrung in getting a market rate from services like Pandora.