MANHATTAN (CN) - Pandora, the online music-streaming service, sued the American Society of Composers, Authors and Publishers, asking a federal judge to set a reasonable licensing rate for streaming music.
Pandora filed a Petition for the Determination of Reasonable License Fees, in a case related to United States of America v. ASCAP.
Pandora claims it is paying ASCAP a far higher percentage of its revenue than traditional broadcasters.
"Despite negotiations spanning more than a year, Pandora and ASCAP have been unable to reach agreement on final license fees and terms," Pandora said in its 44-page petition.
Pandora asked the court to determine "reasonable" fees for the right to stream songs created or published by ASCAP's 435,000 members.
Pandora and ASCAP began negotiating in January, after ASCAP reached a court-approved settlement on license fees with the Radio Music Licensing Committee.
Pandora claims that settlement "expressly covers both over-the-air broadcasting and Internet/mobile (collectively, 'new media') content offerings operated by RMLC members. The RMLC-ASCAP Agreement provides for a blanket license rate of 1.7 percent of licensee Gross Revenue for all such broadcast and new media offerings, less a 'standard deduction' from the applicable revenue base of 12 percent for broadcasting and 25 percent for new media offerings."
"It also provides for a per-program (or program period) license option for the benefit of talk-formatted stations with a base fee of 0.2958 percent of Gross Revenue (subject to the same standard deductions).
"To be clear, any RMLC broadcaster may offer consumers standalone non-interactive radio offerings of the same or similar nature as Pandora's internet radio offering and take advantage of the rates and standard deductions described above. By way of example, Clear Channel, the largest RLMC broadcaster, does so through its iHeartRadio product."
Pandora claims that the RMLC members benefitting from the settlement agreement are among its biggest competitors for audience and advertising dollars.
"Nevertheless, in negotiations between Pandora and ASCAP after the announcement of the RMLC-ASCAP Agreement, ASCAP unreasonably has flatly refused to offer Pandora either the percentage-of-revenue rates or the 'standard deduction' applicable to RMLC members' new media offerings," Pandora said in its complaint. "As to the deduction issue, ASCAP's position is that Pandora should receive a much lower 15 percent deduction applicable only to actually incurred outside-agency commissions; ASCAP's position in this regard is arbitrary, unreasonable and particularly harsh to Pandora, given (as ASCAP knows) Pandora's primary reliance on a highly trained in-house sales team."
Pandora claims that ASCAP's position "flies in the face of recent ASCAP Rate Court jurisprudence. This Court and the 2nd Circuit have made clear that there is no basis for discriminating among licensees offering the same or substantially similar programming based on the manner by which such licensees distribute their product to end users. Yet ASCAP in negotiations has sought to charge Pandora - for a time period falling entirely within the term of the RMLC- ASCAP Agreement - at substantially higher rates (with substantially lower Gross Revenue 'deductions') than ASCAP charges RMLC members for new media offerings including those that mirror Pandora's offering in all relevant respects."
Pandora also claims that after ASCAP changed its rules in April 2011, to allow its members to withdraw certain licensing authority, EMI took advantage of this and soon negotiated a new media rights deal directly with Pandora.
Pandora says, "it is critical ... that its ASCAP fees be diminished by a factor commensurate with Pandora's payment obligations to EMI, Sony and any other publisher that may withdraw catalog from ASCAP."
Pandora, based in Oakland, Calif., is lobbying Congress to pass the Internet Radio Fairness Act, which would enable a panel of federal judges to set streaming royalty rates in a similar procedure to that used for cable and satellite radio.
Pandora is represented by Kenneth L. Steinthal and Joseph R. Wetzel, with Greenberg Traurig in San Francisco.
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