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Music publishers hit out at rate court ruling in ongoing Pandora squabbles
By Chris Cooke | Published on Monday 17 March 2014
Pandora scored something close to a victory on one of the fronts of its ongoing royalty war with the American music industry last week, when a rate court judge considering the streaming service’s licence from song rights collecting society ASCAP set a royalty rate of 1.85% of annual revenue, which basically keeps things as they are.
As previously reported, Pandora has been battling to cut the royalties it pays out to record companies and music publishers for sometime now, the push for better rates becoming a top priority for the company since its IPO in 2011 (and perhaps a sign of what’s to come elsewhere in the streaming domain once the newer digital music start ups float).
Pandora was actually pushing for its music publisher rates to be cut to 1.7%, the figure the terrestrial radio stations in the US have negotiated for their webcast operations. Pandora has long argued that it should have parity with traditional broadcasters in its royalty payments (at one point buying a small FM station to try and get in on the radio sector’s royalty negotiations).
But nevertheless, the rates court maintaining the status quo of 1.85% is still pretty good news for Pandora, because the music publishers, represented here by ASCAP (though counterparts BMI will be pushing for similar) were asking for 3% (with a 2.5% rate backdated for 2013). So the 1.85% decision is not the ruling anyone in the publishing or songwriting community wanted to see.
It may, however, be a temporary victory for Pandora. As previously reported, the big music publishers in America have being trying to withdraw from the collective licensing system in the digital domain, thus taking streaming negotiations away from the royalty rate courts (which only have power over collecting society deals). But the US courts have ruled that, under the current collective licensing rules in America, music publishers are not allowed to withdraw their digital rights from ASCAP and BMI while continuing to licence broadcasters and other public performance via the societies.
The music publishers are busy lobbying for a change to the collective licensing rules to give them a little more freedom in this domain (something generally enjoyed already elsewhere in the world). If these lobbying efforts are successful, the publishers would look to withdraw digital rights from ASCAP and BMI as soon as existing agreements allow, and force Pandora into direct deals with better rates for the publishers.
How long that will take remains to be seen, and in the meantime all the American publishing sector can do is issue angry statements. ASCAP boss John LoFrumento, while taking heart in the court’s decision to not allow Pandora to claim the same online royalty terms as terrestrial radio firms, told Billboard: “Today’s decision further demonstrates the need to review the entire regulatory structure, including the decades-old ‘consent decrees’ that govern [collective] licensing, to ensure they reflect the realities of today’s music landscape”.
Meanwhile the boss of the biggest music publisher, Sony/ATV’s Marty Bandier, added: “This rate is a clear defeat for songwriters. This rate is woefully inadequate and further emphasises the need for reform in the rate court proceedings. Songwriters can’t live in a world where streaming services only pay 1.85% of their revenue. This is a loss, and not something we can live with”.
