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ASCAP trial decision: Pandora wins unchanging royalty rates

ASCAP vs Pandora 300wThe ASCAP vs. Pandora rate-setting trial, brought before a federal judge to determine how much Pandora must pay music publishers and composers to play recordings of their music, has ended in a preservation of Pandora’s existing rate. While Pandora hoped to lower that rate by a small amount, the ruling is considered a loss for ASCAP (American Society of Composers and Publishers), one of the world’s largest royalty collection agencies, which hoped to raise Pandora’s rate by as much as 62%.

Judge Denise Cote‘s ruling came five weeks after closing statements, during which Cote seemed to agree with Pandora’s central argument that it competes directly with broadcast radio, and therefore should pay the same rate to publishers that radio does. Radio stations send 1.7% of revenue to ASCAP; Pandora’s rate is 1.85%. ASCAP argued that Pandora should pay an escalating rate over three years that would step up its revenue percentage to 3%, with part of that increase retroactive to 2013. ASCAP’s lawsuit started in 2012.

Publishers, composer, and songwriters generally think that they are not paid enough for use of their content by online music services. Beyond that, the Performing Rights Organization s (PROs), of which ASCAP and BMI are the two largest, believe that free-market rate-setting is constricted by the so-called consent decree, a government regulation which supplies broadcasters and Internet music companies an always-on license to use music at an established rate.

The frustration on both counts — purported unerpayment and outdated regulations — is evident in the reaction to the ruling from ASCAP CEO John LoFrumento:

“Streaming is growing in popularity – and so is the value of music on that platform. We are pleased the court recognized the need for Pandora to pay a higher rate than traditional radio stations. But recent agreements negotiated without the artificial constraints of a consent decree make clear that the market rate for Internet radio is substantially higher than 1.85%. And today’s decision further demonstrates the need to review the entire regulatory structure, including the decades-old consent decrees that govern PRO licensing, to ensure they reflect the realities of today’s music landscape.”

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