Friday, June 5, 2015

Ruling in Royalty Case Gives BMI a Victory Against Pandora

Written by Ben Sisario

Last week, Pandora Media won two battles in its long-running war against the music industry, but on Thursday, it lost one — this time over how much it should pay the licensing agency BMI in royalties.

BMI sued in 2013 to raise the rate that Pandora, an Internet radio service, pays to play the millions of songs in the BMI catalog. Pandora’s rate was set at 1.75 percent of its revenue; BMI asked the court to raise that to 2.5 percent, and Pandora argued for a rate as low as 1.7 percent.

On Thursday, Judge Louis L. Stanton of United States District Court in Manhattan ruled for BMI, setting the rate at 2.5 percent. The full decision remains under seal, but the overall rate was disclosed by both parties late Thursday.

BMI — Broadcast Music Inc., a 76-year-old clearinghouse for songwriting rights — filed the suit after it was unable to set a rate through negotiations with Pandora, a process dictated by longstanding federal regulation.

“Today’s decision is an enormous victory for the more than 650,000 songwriters, composers and publishers that BMI has the privilege to represent,” BMI said in a statement. “This is an important step forward in valuing music in the digital age.”

While the ruling is a victory for the music industry, which has fought bitterly against Pandora over royalty issues, the ultimate outcome in the case is unclear. Last week, a federal appeals court affirmed a ruling that had kept Pandora’s rate for Ascap, a rival licensing agency, unchanged at 1.85 percent, rejecting Ascap’s arguments to raise it.

On Thursday, a Pandora spokesman said the company would appeal the BMI decision. “We strongly believe the benchmarks cited by the court do not provide an appropriate competitive foundation for a market rate,” said the spokesman, Dave Grimaldi.

Also last week, the Federal Communications Commission lifted a major hurdle to Pandora’s efforts to buy a terrestrial radio station in South Dakota that the company says would entitle it to industry deals for lower songwriting rates, regardless of the decisions in its recent disputes with BMI and Ascap. The company is still awaiting final approval from the F.C.C. for that deal.

Both Ascap and BMI have asked the Justice Department for changes in the regulatory agreements that have governed them for decades. If successful, those changes may allow Ascap, BMI and the music publishers they represent to charge higher rates for use of their songs online.

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