One of the biggest problems with Pandora’s business model is the gray areas in its relationships with performance rights organizations, such as ASCAP and BMI, who collect royalties on behalf of copyright owners. They like to say they work for musicians, but that is mostly PR spin.
Pandora is currently locked in litigation with ASCAP and BMI.
Pandora describes its relationship as follows:
- It currently operates under interim agreements with BMI and ASCAP, which pursuant to their respective consent decrees entered into with the U.S. Department of Justice cannot refuse to grant Pandora licenses for the public performance of the musical works in their repertories.
- The number of works administered by ASCAP and BMI may fluctuate over time and may be subject to the withdrawal of certain rights by individual music publishers for certain types of transmissions, such as Internet transmission by Pandora.
- The decrease in the works licensed by ASCAP and BMI may require more direct licensing by Pandora with individual music publishers.
- Rates payable to BMI and ASCAP can be set, in the absence of a negotiated agreement, by the respective rate courts established pursuant to such decrees in the U.S. District Court for the Southern District of New York.
- To the extent the ASCAP repertory may diminish during the term of Pandora’s consent decree license, its content acquisition costs could be increased by the need to obtain direct licenses from individual music publishers.
- Pandora may also pay reduced amounts to ASCAP and BMI if their repertories are reduced and the rate set for those repertories is adjusted to reflect the diminished size of the catalog of licensable musical works.
- In September 2011, Pandora changed the method it used to calculate royalties due to ASCAP following the execution of an interim arrangement for the period commencing January 1, 2011, pending a final determination of new rates. In November 2012, Pandora filed a petition in rate court to request a determination of reasonable fees.
- Pandora had asked the court to determine that selective withdrawals of so-called “new media” rights by ASCAP-member publishers could not be implemented against Pandora without violating the consent decree.
Okay. That was an excerpt and it was exhausting.
That brings us to today.
Pandora announced that the court granted summary judgment in Pandora’s favor in its rate proceeding with the ASCAP upholding Pandora’s right to perform all compositions in the ASCAP repertory. Pandora said that the decision makes clear that Pandora is entitled to a blanket license the scope of which is not diminished in any manner by the publishers’ attempts to “withdraw” these rights from ASCAP. The ruling has no impact on the royalty rates Pandora currently pays to ASCAP.
It is less than “clear” in that ASCAP will almost certainly appeal; however, Pandora can bask in the good news for a while, along with the several million dollars it is trying to raise.