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Pandora sues ASCAP in a bid to lower royalty rates

updated 07:14 pm EST, Mon November 5, 2012

Five-year 'experimental' rate deemed unhealthy for Pandora

In parallel with its attempt to lobby the US Congress for lower royalty rates on recordings, music streaming company Pandora Media is suing ASCAP, the organization that represents songwriters and composers, to seek lower licensing fees through 2015. Pandora is seeking a blanket licensing fee that would cover all songs, claiming that the current fees set a decade ago prevent profitability.

ASCAP negotiated a fee agreement with the Radio Music Licensing Committee, which represents iHeartRadio's operator Clear Channel and other stations. The conventional radio channels will pay 1.7 percent of gross revenue, with some offsets for advertising commissions. Pandora said in its suit that ASCAP refused to offer it the same conditions and rates.

Pandora and ASCAP were unable to agree on licensing fees after more than year of talks. ASCAP said it had reached an "experimental" fee agreement in 2005 that lasted for five years. Pandora claimed that the license agreement it reached was "ill-suited and not reasonable."

Pandora's co-founder, Tim Westergren, said in a statement in September that "last year, Pandora paid roughly 50 percent of its total revenue in royalties, more than six times the percentage paid by SiriusXM."

For the six months that ended in July, Pandora reported that its net loss increased to $25.6 million from $8.6 million a year earlier, with revenue climbing 54 percent to $182 million.



By Electronista Staff
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  1. Zanziboy

    Forum Regular

    Joined: 08-27-08

    Pandora's whole business model needs reworking. Currently, the more music each subscriber listens to, the more money Pandora loses. In addition, there is a growing number of automobile radios incorporating Pandora, which limits the number of ads that can be provided to users. To increase the number of ads, Pandora will need to support advertising in a similar manner as radio stations. Since in-car users are already paying a premium for the service by utilizing their cellular data plans to listen to streaming music, forcing users to pay this premium to listen to additional ads can only bring failure.

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