Pandora to Appeal Ruling That Could Raise Royalty Costs

Updated on

Pandora Media Inc. said it plans to appeal a federal court ruling that could lead to higher royalty costs for the Internet radio company.

Pandora said in an e-mailed statement that the decision, stemming from a licensing dispute with Broadcast Music Inc., could increase its content costs as a percent of revenue by as much as 80 basis points.

The ruling comes two years after U.S. District Judge Louis L. Stanton in Manhattan ruled Pandora may not have access to songs that music publishers no longer want to be included under Internet licenses with BMI. According to Pandora, the judge rejected its request for a ruling that the scope of its license with the group shouldn’t be affected by publishers’ efforts to modify their contracts to no longer include Internet streaming.

The decision may conflict with a May 6 appeals court ruling upholding Pandora’s victory in a related case. In that case, also in New York, a judge agreed with Pandora that licensing rights couldn’t be withdrawn.

Songwriter rights groups including BMI and the American Society of Composers, Authors and Publishers, or ASCAP, manage performance rights for composers and publishers. Some music publishers have sought to withdraw material from the groups’ licenses to web-based services and negotiate their own deals directly.

Pandora Appeal

“We remain confident in our legal position,” the Oakland, California-based company said Thursday in an e-mailed statement. “We disagree with the court’s ruling and will appeal to the same court that ruled in Pandora’s favor in the ASCAP case last week.”

The ruling couldn’t be immediately confirmed in court records.

BMI called the decision “an enormous victory” for more than 650,000 songwriters, composers and publishers.

“The court resoundingly agreed with BMI, supporting our position that 2.5 percent was reasonable, and indeed at the low end of the range of fees of recent licenses,” it said.

The case is Broadcast Music Inc. v. Pandora Media Inc., 13-cv-04037, U.S. District Court, Southern District of New York (Manhattan).

(Updates with dispute in second paragraph.)
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