This could be the American Society of Composers, Authors and Publishers’ (ASCAP) greatest hit, or it could just be one they’d rather skip. The representative of multiple music publishers and songwriters is set to face off with Pandora Music Inc. in a federal court trial starting Jan. 21 that could set the future on online music licensing.
According to The Wall Street Journal, Pandora currently pays 4.3 percent of its revenue to publishers and songwriters in the music industry represented by ASCAP and other similar organizations. By contrast, record labels and performers receive nearly half of the company’s revenue.
After the two sides’ initial 2005 agreement expired in 2010, Pandora and ASCAP have been licensing music on a new, temporary agreement that was supposed to last until 2015. However, Pandora filed a lawsuit in November 2012, seeking to have a court renegotiate the deal to have it be more favorable to the Internet radio giant.
Pandora’s argument is that radio stations are not required to pay record companies for song use, as the theory goes that airplay increases sales. However, that has not extended to digital plays — record labels have sought funds from digital sources since 1995, and those rates are set by the Copyright Royalty Board in Washington.
ASCAP, meanwhile, looks to command a larger portion of Pandora’s revenue through the terms of the agreement. According to the WSJ, ASCAP lawyers are expected to argue that the licensed music means more to Pandora than to terrestrial radio since Pandora lacks sports and talk programs and also plays fewer ads.
The precedent set by services such as Apple’s iTunes could also come into play. Apple pays publishers 10 percent of revenues from its iTunes Radio service, which ASCAP believes could be precedent to charge other, similar services a higher rate.
A decision in Pandora’s favor from U.S. District Judge Denise Cote could be harmful to ASCAP’s long-term business concerns. Some publishers are considering dropping out of the society, especially after Sony withdrew new media rights from ASCAP in 2013 to pursue deals directly with various Internet radio services.
This isn’t the first time radio royalties have been in the news: