May 06, 2015
Richard Drew/AP
Joe Kennedy, third from left, CEO & President, and Tim Westergren, fourth from left, Chief Strategy Officer & Founder, of Pandora internet radio, ring the NYSE opening bell to celebrate their company's IPO at the New York Stock Exchange.
A federal appeals court in Manhattan rejected appeals by a music licensing group and music publishers that could have forced Internet radio service Pandora Media Inc to pay higher royalties and have access to fewer songs.
The 2nd U.S. Circuit Court of Appeals on Wednesday rejected an effort by the American Society of Composers, Authors and Publishers (ASCAP) to increase the rate that Pandora must pay to license its music from 2013 to 2015.
It also said rules governing ASCAP licensing "unambiguously" barred music publishers from negotiating higher rates for their works with "new media" music users such as Pandora, even as ASCAP licensed the same works to other users.
Vivendi SA's Universal Music Publishing, Sony/ATV Music Publishing and EMI Music Publishing had withdrawn their new media licensing rights from ASCAP, while retaining membership in that group.
The decision is a defeat for publishers and songwriters who believe that growth in streaming music has resulted in unfairly low licensing rates. Under a 1941 antitrust consent decree, ASCAP rate disputes are reviewed in Manhattan federal court.
Pandora is the most popular Internet radio service. The Oakland, California-based company estimated last month that it has more than 250 million users, of whom 79.2 million are "active," who listen to 1.77 billion hours of music each month.
ASCAP, the publishers, Pandora and their lawyers declined to comment or were not immediately available for comment.
Wednesday's decision upheld rulings by U.S. District Judge Denise Cote in Manhattan.
The 2nd Circuit said Cote did not commit "clear error" by requiring Pandora to pay ASCAP a royalty rate of just 1.85 percent of revenue to use its songs from 2011 through 2015. ASCAP had proposed an escalating rate that peaked at 3 percent.
Meanwhile, the appeals court said it could not "rewrite the decree" to let music publishers selectively choose how their works are licensed.
"The licensing of works through ASCAP is offered to publishers on a take-it-or-leave-it basis," the court said.
ASCAP has about 525,000 members, and said it represents music from artists like Leonard Bernstein, Beyoncé, Duke Ellington, George Gershwin, Alan Jackson, Jay-Z and Katy Perry.
The cases are American Society of Composers, Authors and Publishers et al v. Pandora Media Inc, 2nd U.S. Circuit Court of Appeals, Nos. 14-1158, 14-1161, 14-1246.
