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U.S. judge will not change Pandora's songwriters licensing rate

By Nate Raymond

NEW YORK (Reuters) - A federal judge has left stable the rate U.S. Internet radio service Pandora Media Inc must pay songwriters to license their music, a performing rights organization said Friday.

The American Society of Composers, Authors and Publishers said the judge following a non-jury trial set Pandora's rate to license songs registered with the association at 1.85 percent for five years through 2015.

The rate, set by U.S. District Judge Denise Cote in Manhattan, left the royalty at the current rate paid by Pandora. Pandora had sought a rate of as low as 1.7 percent.

But the judge also appears to have rejected an escalating rate structure proposed by ASCAP. The group sought to have Pandora pay 1.85 percent for 2011 to 2012; 2.5 percent for 2013; and 3 percent for 2014 to 2015, according to court filings.

While ASCAP acknowledged not getting the rate it sought, the organization nonetheless said it was pleased the judge did not adopt Pandora's argument that it should pay the 1.7 percent rate that commercial radio stations pay.

"Streaming is growing in popularity - and so is the value of music on that platform," John LoFrumento, the chief executive of ASCAP, said in a statement. "We are pleased the court recognized the need for Pandora to pay a higher rate than traditional radio stations."

But LoFrumento added that the decision demonstrated a need to review the entire regulatory structure for how the U.S. government regulates licensing to "to reflect the realities of today's music landscape."

Cote's ruling remains under seal. In an order Friday, the judge acknowledged having decided the rate and directed the parties to tell her by Tuesday what parts of her ruling should be redacted.

Pandora in a statement said it was "aware that Judge Cote issued an order today under seal, but we cannot comment until it is publicly released."

The ruling came in a 2012 lawsuit by Pandora against ASCAP over what constituted "reasonable" licensing fees.

Under a 1941 antitrust consent decree, ASCAP's rates are subject to review by the federal court in Manhattan when disputes arise.

The New York-based non-profit has membership of about 500,00 members composers, songwriters, lyricists and music publishers and represents artists including Duke Ellington, Katy Perry, George Gershwin and Jay-Z.

Royalties are a major cost for Pandora, with licensing representing 54 percent of its total revenue in 2013.

Pandora said that for the eleven months ended December 31, 2013, it spent 4 percent of its revenue licensing the public performance of musical works from organizations representing songwriters like ASCAP.

The case is In re: Petition of Pandora Media Inc, U.S. District Court, Southern District of New York, No. 12-08035.

(Reporting by Nate Raymond in New York; Additional reporting by Jennifer Saba; Editing by Lisa Shumaker)

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