Judge Rules in Royalty Lawsuit Between Pandora and ASCAP

In somewhat anticlimactic fashion, the lengthy, dramatic battle regarding what digital music service Pandora should pay ASCAP ended Friday when U.S. District Judge Denise Cote ruled that Pandora should continue to pay the performing rights organization what it has been paying through 2015. Pandora had argued that it should pay less than the current 1.85 percent of revenue, while ASCAP had argued for an escalating rate structure that would require Pandora to pay 2.5 percent of revenue for 2013 and 3 percent in 2015.

“In a statement, ASCAP Chief Executive John LoFrumento said that the group was ‘pleased the court recognized the need for Pandora to pay a higher rate than traditional radio stations,’ but still expressed frustration with the decision and the current licensing system, in which digital services can opt to license music at government-determined rates instead of negotiating directly with rights holders,” reports The Wall Street Journal.

“The market rate for Internet radio is substantially higher than 1.85 percent,” explained LoFrumento. “And today’s decision further demonstrates the need to review the entire regulatory structure.”

Judge Cote’s decision does not affect the amount that Pandora currently pays record labels, which is about half of its revenue.

“I wouldn’t say it’s a huge win for Pandora, but it is success to hold off a big rate increase,” said Paul Fakler, a copyright lawyer and partner at Arent Fox LLP.

“ASCAP’s decision to present as evidence the higher rates that Apple pays publishers to use their songs on iTunes Radio may have backfired, he added, because ‘Apple is willing to lose money on music to make money on hardware,’ so its music deals don’t necessarily reflect fair market rates,” notes WSJ.