Pandora is suing ASCAP to secure lower royalty rates to stream music to subscribers. Pandora says that the licensing agreement that it reached with ASCAP was "ill-suited and not reasonable" and warrants a rate similar to what over-the-air radio stations pay. While conventional radio stations pay 1.7 percent of their gross revenue to ASCAP, the publishing agency will not reach a similar deal with Pandora. The streaming music service claims the high costs of licensing music by ASCAP keeps them from profitability. The lawsuit was filed in federal court in New York Monday (Nov. 5).
ASCAP represents around 435,000 songwriters, composers and music publishers. Pandora is asking the court to set a "reasonable" license fee rate with ASCAP – a fee separate from the royalty issue which Pandora is also fighting. Pandora wants a blanket licensing fee that would cover all songs in the ASCAP library.
Pandora and ASCAP had reached a five-year experimental agreement in 2005 which expired in 2010. Pandora now says in the court filing, "The license rates and other material terms of the 2005 license agreement were presented to Pandora by ASCAP as being effectively non-negotiable. The experimental license agreement was ill-suited and not reasonable."
ASCAP has already negotiated a fee agreement with the Radio Music Licensing Committee, which represents broadcasters. That agreement calls for a payout of 1.7 percent of gross revenue minus deductions based on advertising commissions. Pandora is complaining that ASCAP has refused make the same offer to them. Pandora also believes they are entitled to lower rates due to some large music publishers planned withdrawal of new media rights from ASCAP in favor of negotiating licensing fees directly with Web radio services.
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