June 13 (Bloomberg) -- Internet radio company Pandora Media Inc., already suing performing-rights organization Ascap over song-licensing rates, was taken to court by Ascap’s largest competitor, which is seeking higher fees.
Broadcast Music Inc. said in a filing today in Manhattan federal court that it proposed a “reasonable” blanket royalty rate for songs played on Pandora, the largest Internet radio service, and was rejected. BMI didn’t specify the proposed royalty in the filing.
“BMI has proposed an increase in Pandora’s fees consistent with market rates to reflect the explosive growth of the Internet streaming marketplace,” New York-based BMI said in its complaint. “We expect Pandora to claim that it is no different than commercial broadcast radio. This contention is wrong.”
BMI licenses public performance rights to 7.5 million musical compositions from more than 600,000 composers, songwriters and publishers, according to the court filing. Its repertoire includes compositions by Michael Jackson, Eminem, Lady Gaga and John Adams.
Songwriters, publishers and the groups that represent them have sought higher royalty rates from broadcasters for public performances of their works at a time when royalties from the sale of recorded music have declined.
Pandora sued the American Society of Composers, Authors and Publishers in November to seek “reasonable” license fees to play Ascap songs on its service. Oakland, California-based Pandora has also been lobbying the U.S. Congress for lower rates. This week it bought a radio station in South Dakota to try to get the same rates that traditional AM/FM broadcasters such as CBS Corp. pay.
“Any shred of credibility Pandora had is gone,” David Israelite, the president of the National Music Publishers Association, said after the radio station purchase was announced. “They have waged war on songwriters,” he said at the group’s annual meeting in New York yesterday.
A consent decree between broadcasters and performing rights organizations requires them to seek license rate determinations from the New York federal court if they can’t negotiate an agreement.
“Disputes regarding the reasonableness of fees between BMI and music users are adjudicated in federal court just as disputes between Ascap and music users,” Pandora said in an e-mailed statement today. “We look forward to the court’s oversight of this matter.”
The New York federal court has approved licensing rates between the performing rights groups and the Radio Music Licensing Committee, which represents terrestrial broadcasters including CBS and CC Media Holdings Inc.’s Clear Channel. The rates also cover the online stations those companies operate.
Internet radio companies have said the rates a CBS must pay for its Web broadcasts are lower than what they have to pay. The terrestrial broadcasters say they pay significant fees for the music played over-the-air.
The performing-rights groups are challenged by the recent withdrawal from them of Internet performance rights by large music publishers, including EMI Music Publishing, which are negotiating directly with online providers such as Pandora and Spotify Ltd.
The case is Broadcast Music Inc. v. Pandora Media Inc., 13-cv-04037, U.S. District Court, Southern District of New York (Manhattan).
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