updated 04:10 pm EDT, Sun March 16, 2014
Rate lower than ASCAP requested, higher than terrestrial radio
US Federal Court Judge Denise Cote has issued a ruling in a case between streaming music service Pandora and music publishers, which has set a new rate at which Pandora Radio will have to pay to the American Society of Composers, Authors and Publishers (ASCAP) for performance rights on streaming radio. The rate is set slightly higher than the 1.7 percent Radio Music Licensing Committee rate for terrestrial radio Pandora argued was appropriate, but far less than the tiered rate ASCAP proposed.
Industry trade publication Billboard writes that the decision comes as a significant defeat to the organization, which has been fighting with Pandora for years over payments and streaming rights. Based on the structure that ASCAP proposed, payments would have constituted 2.5 percent of Pandora's revenue for 2013, and three percent for 2014 and 2015 (with likely rises in future years). The group also clashed with Pandora over buying a physical radio station in South Dakota in 2013, which it did in an attempt to qualify as a terrestrial radio station broadcaster, thus qualifying for the lower radio royalty rates.
How the decision will play out in another court case Pandora is fighting with BMI remains unseen, as that suit is still in the discovery stage -- but it is certainly going to have some influence. If a similar rate approach is taken in the BMI suit, Pandora would only be facing a yearly payout of less than four percent of its overall revenue to music publishers.
ASCAP CEO John LoFrumento commented on the decision, pointing out that other "recent agreements negotiated without [the] artificial constraints of a consent decree make clear that the market rate for Internet radio is significantly higher than 1.85 percent." This most likely refers to the deal that was struck with Apple over iTunes Radio, which pays 10 percent of revenues to publishers (but this rate covers both ASCAP and BMI). He went on to say that the "decision further demonstrates the need to review the entire regulatory structure."