Thursday, December 19, 2013

Rate Court Rules on Digital Rights: Different Outcomes for ASCAP, BMI Against Pandora

Pandora's battle with the PROs was further defined this week when a rate court judge handed down its decision in a case between Pandora and BMI. The issue in question was Pandora's license to utilize BMI's repertoire as a part of its digital radio service. In September, a separate rate court judge ruled on a similar case between Pandora and ASCAP.

Earlier this year, several publishing companies signaled their intent to withdraw their digital rights from BMI and ASCAP beginning Jan. 1, 2014, stemming largely from the two PRO's limited ability to negotiate with companies like Pandora because of the federal consent decree under which they are required to operate. In response, Pandora asked the rate court to rule on the legality of this partial withdrawal of rights by the publishers, which if allowed, would require Pandora to negotiate new deals directly with each publisher in order to continue using their music. Here's a summary of the rulings in each case:

ASCAP/Pandora ruling (September 2013): Judge Denise Cote ruled that a partial withdrawal of rights is not allowed under the consent decree, and that ASCAP must make all of its repertoire available to all licensees. Thus, Pandora has the right to utilize all of ASCAP's music in its digital radio service until it's license with ASCAP ends on Dec. 31, 2015. Publisher's may withdraw their grant of rights at that time, but only if they withdraw from ASCAP entirely.


BMI/Pandora ruling (December 2013): Judge Louis L. Stanton ruled that a partial withdrawal of rights is not allowed under the consent decree, but that Pandora's license with BMI does not include the music from the publishers in question because they signaled their intent to withdraw their rights at the same time the BMI/Pandora license was renewed, on Jan. 1, 2013. Now, given that a partial withdrawal is not allowed, these publishers will either need to withdraw from BMI completely on Jan. 1, 2014 (in which case Pandora would need to negotiate with each publisher separately to continue using its music), or not cancel the withdrawal and remain with BMI for all licensees (in which case Pandora will be able to continue using its music under the current terms).


So, while each ruling differed in the details, the general consensus is that a partial withdrawal of rights is not allowed under the current consent decree. Publishers are either all in, or all out. In the meantime, rate court proceedings are currently underway that will decide the rate Pandora must pay ASCAP for its license. If the rates are set favorably for ASCAP, the publishers may not be in such a hurry to leave after all. But if not, it will be interesting to see what decisions are made when the ASCAP/Pandora license expires at the end of 2015.

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