Pandora Sues ASCAP, Demands Lower Royalty Rates

Music streaming service Pandora has filed a lawsuit against music royalty clearinghouse ASCAP. The internet based music provider is asking that a court force ASCAP to charge lower fees through 2015.

If it gets its way, Pandora will receive a blanket licensing fee that would cover all songs. Executives at Pandora claim that fees set more than 10 years ago prevent new media businesses from becoming profitable.

Pandora is upset that ASCAP will not offer it the same fees given to iHeartRadio’s operator Clear Channel and various other stations throughout the United States. Several groups pay just 1.7 percent of gross revenue with offsets for advertising commissions. Pandora is asking that it receive the same considerations for streaming music over internet connections.

ASCAP and Pandora engaged in talks for more than one year but were unable to reach an agreement regarding the cost of song streaming. According to ASCAP, it reached an “experimental” fee agreement in 2005; however, that fee only played out through 2010. According to Pandora, the agreement reached in 2005 was “ill-suited and not reasonable.”

In 2011, Pandora paid nearly 50 percent of its total revenue in royalties. To put that revenue spent in perspective, SiriusXM paid nearly six times less based on its revenue cut to ASCAP.

Striking a fair content deal is an important part of Pandora becoming profitable. Pandora executives announced a net loss of $25.6 million in the period ending in July. Pandora lost $8.6 million the year prior. Pandora’s increasing losses come at a time when the company increased revenue to $182 million, a 54 percent jump.