Pandora Wins Licensing Ruling Against Songwriters

Pandora Media Inc. (P), the biggest Internet radio service, won a court order to stop a group representing songwriters and music publishers from limiting the number of songs that it licenses to Pandora.

U.S. District Judge Denise Cote in Manhattan said in a ruling yesterday that Pandora’s five-year license beginning Jan. 1, 2011, won’t be affected by withdrawals of new-media licensing rights from the repertory of the American Society of Composers, Authors and Publishers. Cote granted Pandora’s request for summary judgment, citing an earlier consent decree between Ascap and the U.S.

“The language of the consent decree unambiguously requires Ascap to provide Pandora with a license to perform all of the works in its repertory,” Cote said in the ruling.

The issue in the case arose from decisions by large music publishers including Sony Corp. (6758)’s 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 was pending, the organization shouldn’t allow the withdrawals, which would reduce the number of songs covered by Ascap’s licenses.

“We welcome the court’s decision,” Chris Harrison, an assistant general counsel of Pandora, said in a statement. “We hope this will put an end to the attempt by certain Ascap-member publishers to unfairly and selectively withhold their catalogs from Pandora.”

‘Reasonable’ Fees

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

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 the federal consent decree that resulted from a 1941 lawsuit against Ascap, the U.S. District Court in New York has jurisdiction over rate-setting if the parties can’t come to terms. Cote will preside over a trial to set the rates in December.

‘Fair Pay’

“The court’s decision to grant summary judgment on this matter has no impact on our fundamental position in this case that songwriters deserve fair pay for their hard work, an issue that the court has not yet decided,” John Lofrumento, Ascap’s chief executive officer, said in a statement.

“Ascap will demonstrate the true value of songwriters’ and composers’ rights, a value that Pandora’s music streaming competitors have recognized by negotiating rather than litigating with creators of music,” Lofrumento said.

Pandora’s competitors include Spotify Ltd. and a new service introduced by Apple Inc. (AAPL), as well as the online stations of traditional radio companies like CBS Corp. (CBS)

In oral arguments before Cote on Sept. 11, Ascap said that nothing in the federal consent decree prohibited publishing companies from withdrawing rights.

Rights Withdrawals

Other large publishers, including Access Industries Holdings Inc.’s Warner Chappell Music, Vivendi SA (VIV)’s Universal Music Publishing and Bertelsmann SE & Co.’s BMG Rights Management, have also announced plans to withdraw new-media licensing rights from Ascap.

Ascap represents the music of artists including Beyonce, Alan Jackson, George Gershwin and Duke Ellington.

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.

Pandora rose 1.8 percent to $25.64 at 4:15 p.m. in New York trading. The shares have more than doubled this year.

The case is In re Petition of Pandora Media Inc., 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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.