Pandora Royalty Payments To Songwriters Will Not Change, Judge Rules

The Pandora royalty paid to music publishers by the highly popular internet music streaming service will not go up — or down. So ruled a federal judge Friday, in a case that saw the interests of songwriters pitted against business priorities of a top venue for getting their songs to public ears.

The federal case also pitted the new methods of delivering music against the venerable business model of the established music industry, which has a way of operating that dates back decades. But in recent years, as it has with many existing industries, the internet, in this case Pandora Radio, came along and turned that old way on its head.

For the years between 2011 and 2015, Pandora must pay a royalty of 1.85 percent of its total revenues to songwriters, represented by the music publishing consortium ASCAP — the American Society of Composers, Authors and Publishers. ASCAP wanted the Pandora royalty to go up — in fact, ASCAP wanted Pandora to nearly double its royalty, paying 3.0 percent to music publishers by 2015.

Pandora, on the other hand, wanted to lower its royalty to 1.7 percent, which is the same rate that old-guard, “over the air” radio stations pay to ASCAP. Pandora wants to be treated no differently than any other radio station when it comes to royalty payments.

ASCAP argued that because internet streaming services such as Pandora — and others, which would include Spotify, Songza, Rdio and many more — are increasing in popularity as the primary way many consumers receive their music, and broadcast radio stations are being displaced in the market, Pandora should bump its royalty rate higher.

Though Judge Denise Cote of U.S. District Court in Manhattan essentially declared the contest of wills a draw, ASCAP declared victory, saying in a statement it was “pleased the court recognized the need for Pandora to pay a higher rate than traditional radio stations.”

But Pandora and other internet radio — as it skyrockets in music market share — should no longer be subject a government-regulated rate, an artificially low one, said ASCAP CEO John LoFrumento.

“The market rate for Internet radio is substantially higher than 1.85 percent. And today’s decision further demonstrates the need to review the entire regulatory structure,” he said, implying that the next step in the ASCAP-Pandora battle may be a fundamental effort to change the law governing the royalty rate, rather than haggling over the Pandora royalty rate itself.

Streaming music online since 2005, Pandora Radio is listed by the internet monitoring site Alexa as the 219th-most trafficked site on the internet, and the 48th-most of all United States-based sites, its massive popularity being a main reason why ASCAP wants Pandora to pay a higher royalty.