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Pandora Lawsuit May Overturn Outdated Royalty Plans

Music services such as Pandora are in a fix today. They are forced to pay up a hefty part of their profit to rights management groups, while actual songwriters don’t get much from them. This has led the company to file a suit which is very significant.


Ascap and BMI are the two very groups which dominate music publishing and licensing in the U.S. For some time since their inception, the groups had acted independently but then Justice Department came up with consent decrees to overlook them. This was done as a result of federal antitrust investigations against both groups.

Together, the duo represent more than 90% of all commercial music available in the U.S., which should give a fair hint of their immense power and influence in the music industry. But times are changing and both BMI and Ascap refuse to change with them. Digital is the future of the music but the current policies governing music licensing from the likes of BMI, Ascap are outdated and obsolete and they are not ready to change it.

Digital services such as Pandora have to give most of their profits to groups like BMI and then they end up paying the songwriters puny sums. An example of this was cited by songwriters who were protesting during a congressional hearing of Pandora executives. The songwriters revealed that for some of their most hit songs, they were paid a mere $587.39 for 33 million plays!

The reason for this is simple: big fishes in the music industry have carved lucrative licensing deals with BMI and Ascap. This leaves relatively new entrants such as Pandora forced to either pay up as much or negotiate directly. As a result, Pandora has filed a lawsuit against BMI for its foul play. BMI has responded just like any major entity in the content industry does – by filing a lawsuit against Pandora.

It must be noted here that leading music figures including artists, songwriters and musicians have cited repeatedly, and more so since Pandora launched the lawsuit, that the consent decrees by Justice Department overlooking BMI and Ascap licensing deals are absolutely outdated and need imminent revamp.

If Justice Department fails to accomplish this, it is doomed to disrupt the music industry like never before. Zach Horowitz, who is the chairman of the Universal Music Publishing Group gives a hint of this when he says, “Everything is geared now to what happens with the Department of Justice. If we can’t secure adjustments to the consent decrees, which were last modified before the introduction of the iPod, we’ll have no choice but to consider some radical steps in order to ensure our writers are fairly compensated in the rapidly changing marketplace.”

BMI and Ascap are certainly the heavy-weights who, in the typical jargon of governmental affairs, are too big to fail. But that must not stop Justice Department from improving the consent decrees for these entities and making space for new players in the music industry. Or the competition will flounder and the digital music industry will be struggling in the coming days.

Courtesy: NYT

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Salman Latif is a software engineer with a specific interest in social media, big data and real-world solutions using the two.Other than that, he is a bit of a gypsy. He also writes in his own blog. You can find him on Google+ and Twitter .

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