March 20, 2014

What ASCAP Members Need to Know About the Pandora Rate Court Decision

What You Need to Know About the Pandora Rate Court Decision

As most of you know, online streaming giant Pandora began litigation against ASCAP's more than 500,000 songwriter, composer and publisher members in the fall of 2012, seeking a lower rate for public performance licenses. Under the terms of ASCAP's decades-old consent decree, ASCAP must grant a license to anyone who asks. When parties can't agree on the price for a license, a federal judge (or "rate court") decides the rate.

On Friday, Judge Denise Cote issued a decision in the ASCAP-Pandora rate court proceeding, bringing a nearly year and a half-long legal battle over rates to a close. Earlier today, the full 136-page text of Judge Cote's decision was made public, detailing her rationale for setting a rate of 1.85% of Pandora's revenues for each of the five years of the license term (2011-2015).

While the court rightly recognized the need for Pandora to pay a higher rate than the rate being paid by most radio stations – the rate that Pandora was seeking – ASCAP continues to believe that songwriters deserve more.

"Streaming is growing in popularity - and so is the value of music on that platform," said ASCAP CEO John LoFrumento. "Recent agreements negotiated without the artificial constraints of a consent decree make clear that the market rate for Internet radio is substantially higher than 1.85%."

Songwriter and ASCAP President Paul Williams said:
"The rate court's decision preserves the status quo, which is unacceptable for the thousands of songwriters and composers who depend on ASCAP royalties for their livelihoods. Unfortunately, it is now more clear than ever that it is time to update the laws that regulate how songwriters and composers license our works to make sure the next generation of songwriters is paid fairly regardless of how listeners enjoy their music. That's why ASCAP is leading the charge for reform."

But we wanted to provide ASCAP members with some more context on our position.

The fact is, streaming is growing more and more popular – and so is the value of music on that platform.

Indeed, there is strong evidence to support the need for Pandora to pay a higher rate. Just last year, Apple's iTunes Radio negotiated licenses with PROs and publishers, voluntarily agreeing to pay more than twice the rate just established by the court. We're disappointed that the judge rejected that recent and relevant benchmark, as well as those established by other recent deals in the marketplace with on-demand radio services, like Spotify, and recent court decisions, like the 2010 RealNetworks case, which set the rate for pure audio webcasts and strongly suggests that a rate of 2.5% or higher would be appropriate for a music-intensive, customized service like Pandora.

Perhaps the biggest takeaway from this rate court proceeding, given the contrary views as to appropriate benchmarks and the extraordinary cost to both sides, is a recognition that we need to take a fresh look at the system that regulates music licensing, including the outdated ASCAP consent decree, to make sure it reflects the realities of today's music marketplace and consumer behavior.

To that point, the court's decision included the following comment:

"The Court is sensitive to ASCAP's concerns and understands that the unique characteristics of the market for music licensing and the Consent Decree regime produces challenges for all parties."

That's why ASCAP is talking to stakeholders throughout the music industry, trying to build consensus around how we can create a more efficient, effective and modern music licensing system – one that better serves not only ASCAP members, but also music licensees and music fans everywhere.

This is an ongoing conversation, and we encourage you to participate by clicking here.

We are encouraged by the emerging consensus around the importance of music licensing reform – and by meaningful steps being taken by policymakers to help facilitate change. Just last month, the bipartisan Songwriter Equity Act was introduced in Congress, aimed at amending US copyright law to remove artificial barriers that keep songwriter compensation below fair market rates. And US Register of Copyrights Maria Pallante announced a study to evaluate the effectiveness of the current music licensing system, commenting "the time has come to re-examine whether the consent decrees governing ASCAP and BMI are serving their intended purpose and whether the consent decrees are facilitating or hindering a robust and competitive marketplace."

ASCAP will continue to be on the frontlines in the fight for fair compensation for songwriters and composers in the digital age. We encourage you to visit our Advocacy page for the latest news and information about how you can get involved in the campaign for music licensing reform.

Working together, we can build a more sustainable future for music – one in which songwriters and composers can thrive alongside the businesses that revolve around our music.

Thank you for your continued support.