Pandora to Appeal Judge’s Royalty Ruling in Favor of BMI

Pandora said that it will appeal a federal judge’s ruling that found that the company should pay a higher royalty rate to BMI for music licenses.

The ruling from Judge Lewis Stanton is just the latest wrinkle in a protracted dispute over what digital music services should pay to songwriters and publishers in a fast-changing consumer landscape.

According to BMI, the judge concluded that BMI’s proposed rate was “reasonable, and indeed at the low end of the range of fees of recent licenses.”

Pandora spokesman Dave Grimaldi said that the ruling “could increase our content costs as a percent of revenue by up to 80 basis points.”

“We strongly believe that the benchmarks cited by the court do not provide an appropriate competitive foundation for a market rate,” he said.

He noted that they will be appealing to a court that last week sided with Pandora in its litigation with ASCAP over music licensing rates. That appellate decision kept the rate at 1.85% of Pandora’s revenue.

In an email to employees, BMI president and CEO Mike O’Neill noted that the decision “also establishes that existing marketplace agreements can be taken into account when determining rates, a key factor for us, and the industry. This is an important step forward in valuing music in the digital age.

“BMI fully supports all new avenues for the performance of our repertoire, but we also believe that creators should never have to virtually give away their product for free in order to subsidize the development of someone else’s business,” he wrote.

BMI filed suit in 2013, claiming that the Pandora rate of 1.75% of revenue was too low.

Pandora is also seeking other avenues when it comes to royalty rates. After an FCC ruling in its favor earlier this month, it cleared a major step toward its purchase of a broadcast radio station in Rapid City, S.D., which could enable it to pay lower terrestrial radio rates to songwriters.

But representatives for songwriters have been pressing their case on Capitol Hill. ASCAP President and Chairman Paul Williams and other songwriters, including Alan and Marilyn Bergman, Desmond Child and John Bettis, met with lawmakers earlier this week to advocate for the Songwriter Equity Act, which would update copyright law. ASCAP and BMI are also calling on the Justice Department to update consent decrees, first put in place in 1941, that have governed competition in music licensing.

In a statement, Williams said that the latest ruling “is welcome news for music creators, but make no mistake, Pandora will stop at nothing in their ongoing effort to shortchange songwriters. ASCAP and the music community must continue to fight for the urgent reforms needed to enable all songwriters, composers and music publishers to obtain fair compensation for the use of our music.”

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