And just like that, Pandora has effectively declared World War III on streaming royalty rates. The latest bloodshed is happening in the publishing theater, where Pandora has now opted to sue ASCAP to force lower statutory rates for songwriters. The lawsuit, filed Monday in the US District Court of Manhattan, claims that ASCAP has established rates that are “ill suited and not reasonable,” based on an ‘experimental’ licensing agreement originally set in 2005.
ASCAP is the largest performance rights organization (or PRO), flanked by BMI and the smaller SESAC. Apparently, the parties were unable to reach a resolution after a year of discussions, though Pandora complained that ASCAP essentially presented its rates as ‘non-negotiable.’ Additionally, Pandora pointed to a successful resolution between ASCAP and terrestrial radio stations, one that appears to have included the Clear Channel-owned iHeartRadio competitor.
But wait: there’s one gigantic problem with trying to drive publishing royalties down. Because publishers themselves are trying to drive them up, by a huge margin. And part of the motivation behind that push is that publishers are receiving just a fraction of the payouts allocated for recordings. “Right now, Pandora pays record labels $12.50 for every $1 paid to songwriters and music publishers,” a top publishing executive recently ranted to Digital Music News.
“It is the worst division of content payments for songwriters in any form of the music business. Sony/ATV is attempting to improve that horrible ratio.”
Which brings us to Sony/ATV, the next complicated wrinkle in this story. The mega-publisher is now striking out on its own to establish independent royalty rates, a potentially gargantuan problem for Pandora (and other services including Apple’s expected iRadio). And after ingesting EMI Music Publishing, Sony/ATV is a total behemoth with a refreshed commitment towards driving value around its catalog.
In full circle, departing publishers like Sony/ATV are another reason why Pandora is seeking lowered performance royalties from a weakening ASCAP.