Corrections & Clarifications: An earlier version of this report misstated the rate that Pandora paid when a song was played on its free service.
Pandora on Tuesday announced landmark multi-year licensing deals with ASCAP and BMI, ending years of legal battles between the top Internet radio platform and songwriters and publishers.
Because of the new agreement, Pandora (P) has agreed to drop its appeal in the rate dispute with BMI. The two performance-rights organizations have been engaged in a bitter legal feud with Pandora, which does not need permission to play a songwriter’s song under U.S. copyright law.
The statutory rate is determined by a federal rate court.
Before the new agreement, Pandora paid BMI members 2.5% of its revenue and ASCAP members 1.75%. Terms of the deal, namely how much songwriters will be paid each time their song is played on Pandora, were not disclosed.
The agreement was met with positive reviews in Nashville, where the top songwriters trade group said the performance-rights groups deserve credit for striking deals to increase payouts to their members.
Pandora’s royalty rate has been a sore subject among songwriters, with hit-makers such as Kevin Kadish, who co-wrote All About That Bass, disclosing he was paid $5,679 for 178 million plays.
“This agreement is good news for music fans and music creators, who are the heart and soul of ASCAP, and a sign of progress in our ongoing push for improved streaming payments for songwriters, composers and music publishers that reflect the immense value of our members’ creative contributions,” ASCAP Chief Executive Elizabeth Matthews said.
The rate Pandora pays songwriters and publishers has been the subject of federal legislation, including the Songwriter Equity Act. The bill would allow the rate court to factor in the value of a song in the free market, including how much songwriters are paid for licensing their songs for television or film, when determining a rate.
The new deal is comparable to other direct deals in the marketplace, Mike O’Neill, BMI president and chief executive said in prepared remarks.
Executive Director Bart Herbison of Nashville Songwriters Association International applauded the deals as good news for songwriters. But he cautioned that the agreements do not negate the necessity of the Songwriter Equity Act or the need for the U.S. Department of Justice to revise the consent decrees that govern ASCAP and BMI.
The Justice Department has been reviewing the consent decrees that set out how the two nonprofit performance rights organizations operate.
“The (performance rights organizations) have a responsibility to achieve higher rates for the songwriters they represent, and they’ve done that,” Herbison said. But the “U.S. Department of Justice (needs) to make significant changes in the ASCAP and BMI consent decrees that are antiquated from 1941. … My guess is you’ll still see songwriters getting hundreds of dollars for millions of spins.”
The deals are a real step forward to modernize compensation for creators “but still short of a true market rate,” Nashville music publisher Marc Driskill said.
Some major music publishers had pondered withdrawing some licensing rights from ASCAP and BMI to negotiate better rates with Pandora privately.
A federal judge ruled that publishers must enter into all-or-nothing arrangements with the performance rights organizations, meaning they either must withdraw all of their rights or keep them all with ASCAP or BMI. In recent weeks, publishers have been entering into their own deals with Pandora as well.
Last week, the Copyright Royalty Board increased the rates that Pandora will have to pay artists and record labels when their songs are played on the popular Internet radio service. Pandora will pay 0.17 cents when a song is played on its free service — up from 0.14 cents — and 0.22 cents when a song is played on its subscription service. That represents a decrease from its current rate of 0.25 cents, but substantially more than the 0.13-cent rate Pandora wanted.
At mid-afternoon Tuesday, the price of Pandora stock was flat after news of the deals.
“At Pandora we are delivering on our commitment to ensure that music thrives,” said Brian McAndrews, chief executive officer of Pandora. “These collaborative efforts with the leading performance rights organizations, as well as our recent direct deals with several music publishers, demonstrate our progress in working together to grow the music ecosystem.”
Follow Nate Rau on Twitter: @tnnaterau
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