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BMI Prevails Over Pandora in Rate Case

Pandora to appeal rate increase

Music performing rights organization Broadcast Music Inc. has prevailed over Internet audio company Pandora in a royalty rate case.

Federal district court Judge Louis Stanton awarded BMI a fee of 2.5% of revenue from Pandora, up from the current 1.75%.

Pandora had sought to pay between 1.7% and 1.8% of revenue, we’ve reported. The Internet audio company says it pays about half of its revenue, which was $921 million last year, to rights holders.

BMI attorney Scott Edelman said: “We’re very satisfied with Judge Stanton’s ruling, which we believe brings royalty and licensing rates for musical content into the digital age. Digital streaming has proved itself as a means to greater exposure for artists, but has been less successful at generating a revenue stream. That was the heart of this case.”

In contrast, a similar case went in Pandora’s favor last week when a federal appeals court ruled Pandora can keep its ASCAP music licensing rate at 1.85% of revenue.

Supporters of higher music royalties hailed Thursday’s ruling. BMI called the decision “an enormous victory” and “an important step forward in valuing music in the digital age.”

National Music Publishers’ Association President/CEO David Israelite agreed, calling the ruling a “positive first step” noting the decision “sends a clear message that Pandora cannot continue” to grow its business “on the backs of struggling songwriters.”

Pandora says it will appeal the decision. “We remain confident in our legal position,” stated Pandora Director of Public Affairs Dave Grimaldi. “We strongly believe the benchmarks cited by the court do not provide an appropriate competitive foundation for a market rate.”

The ruling occurs as the Justice Department is reviewing consent decrees for BMI and ASCAP, which seeks to have the restrictions relaxed.