Pandora Media Sues Ascap Seeking Lower Songwriter Fees

Pandora Media Inc. (P), the biggest Internet radio service, asked a federal judge to stop a group representing songwriters and music publishers from narrowing the scope of licenses that allow their music to be played.

The radio company argued in federal court in Manhattan yesterday that if the American Society of Composers, Authors and Publishers is permitted to change the scope of the licenses, it would have far fewer songs from the Ascap repertory to offer its listeners than its competitors. U.S. District Judge Denise Cote said she would rule later on Pandora’s motion for summary judgment.

“I am very concerned about unintended consequences,” Cote said at the end of a 3 1/2- hour hearing. “What ruling I give I want to be as narrow as possible.”

The issue at yesterday’s hearing arises from decisions by large music publishers including EMI Music Publishing Ltd. and Sony/ATV Music Publishing LLC to withdraw new-media rights from Ascap and negotiate license fees directly with Web radio services. Pandora said that while its license renewal with Ascap is pending, the organization shouldn’t allow the withdrawals, which would reduce the number of songs covered by Ascap’s licenses.

Pandora filed a lawsuit in November asking the court to set “reasonable” fees for a licensing agreement with Ascap through 2015. It’s seeking a blanket license that would cover all songs represented by the 470,000-member group. Pandora said the current fees make sustained profitability impossible.

Licensing Rates

Ascap and Pandora reached an “experimental” fee agreement in 2005 that lasted until 2010. The parties then were unable to agree on licensing rates after more than a year of talks, Pandora said in its complaint.

Under the terms of a federal consent decree, the U.S. District Court in New York has jurisdiction over rate-setting if the parties can’t come to terms. Cote will conduct a trial in December.

“It’s impossible to go to trial not knowing the repertory for which we’re trying to set rates,” Kenneth Steinthal, a lawyer with King & Spalding LLP representing Pandora, told the judge yesterday.

Ascap said that nothing in the federal consent decree prohibits publishing companies from withdrawing rights. Ascap represents the music of artists including Beyonce, Alan Jackson, George Gershwin and Duke Ellington.

Revenue Percentage

“We will ask for a percentage of revenue from Pandora, adjusted for Ascap’s share of performances on Pandora and exclusive of what’s directly licensed,” Jay Cohen, a lawyer for Ascap with Paul, Weiss, Rifkind, Wharton & Garrison LLP, told the judge. “We will not get paid for music we no longer have.”

Cohen asked the judge to get an opinion from the U.S. Justice Department on whether the language of the consent decree requires Ascap to license all public performance rights to a composition. Cote is taking the request under consideration.

Pandora, based in Oakland, California, offers programming to subscribers based on their musical preferences. The company said this month it had 72.1 million active listeners at the end of August, an increase of 28 percent from the same period a year earlier.

The company is also lobbying the U.S. Congress for lower royalties on recordings.

The case is In re Petition of Pandora Media Inc., 1:12-cv-08035, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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