Pandora Media Inc. has taken its fight over music licensing fees to the next level. The company recently filed suit against the American Society of Composers, Authors and Publishers (ASCAP) and has asked the court to set “reasonable” rates and licensing terms that would last through 2015.
Digital music sites devote a substantial amount of their revenue to securing music licenses. In fact, Pandora devotes roughly 50 percent of its revenue to “content acquisition.” Accordingly, the company supports the Internet Radio Fairness Act, which seeks to lower royalty rates paid by Internet radio providers. It would make Internet radio stations subject to the 801(b) standard of the Copyright Act, which is currently applied to cable and satellite radio providers like SiriusXM.
The current lawsuit is the result of failed attempts to renegotiate an “experimental” fee agreement that Pandora executed with ASCAP in 2005. Pandora claims that ASCAP characterized the original agreement as “non-negotiable,” and the terms are no longer “appropriate benchmarks for establishing reasonable ASCAP license fees.” Pandora has been paying interim rates since 2010.
As the Wall Street Journal reports, Pandora also alleges that ASCAP has refused to offer the company the same rates as those enjoyed by its competitors. “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 spokeswoman said. “As a result, we are initiating the process that has been in place for decades to resolve royalty disputes.”
The music royalties paid by Internet radio providers are clearly a hot topic in IP law right now. Stay tuned for updates.