The legacy recording industry's ridiculous war on Pandora has reached some really ridiculous levels, especially as ASCAP has continually tried to pretend that Pandora was trying to stiff artists. The details suggested something entirely different. After staying quiet for a while, Pandora finally highlighted the true story, which showed that the claims about Pandora were completely bogus. It was actually ASCAP who was playing sick games with Pandora, trying to remove the right to play certain songs, without even letting Pandora know which songs.
Historically, Pandora has paid essentially the same rate as all other forms of radio, a rate established unilaterally by the performing rights organizations, ASCAP and BMI, in the late 1990s. In November of last year, following a lengthy negotiation, Pandora agreed with ASCAP to a new rate, an increase over the prior amount, and shook hands with ASCAP management. Not only was our hand-shake agreement rejected by the ASCAP board, but shortly thereafter we were subjected to a steady stream of “withdrawals” by major publishers from ASCAP and BMI seeking to negotiate separate and higher rates with Pandora, and only Pandora. This move caused us to seek the protection of the rate, also recently negotiated, enjoyed by the online radio streams of broadcast radio companies. It’s important to note that these streams represent 96% of the Internet radio listening hours among the top 20 services outside of Pandora (talk about an un-level playing field). We did not enter this period looking for a lower rate – we agreed to a higher rate. But in a sad irony, the actions of a few small, but powerful publishers seeking to gain advantage for themselves has caused all songwriters’ royalties to go down. Any characterization of Pandora as being out to cut publishing rates flies in the face of the facts.
And while not highlighted there, Pandora also noted that ASCAP
refused to let Pandora know which tracks were being withdrawn, leading to uncertainty over potential liability if it played the wrong track:
During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work. At Pandora’s scale, such liability would be enormous.
As we noted at the time, this appeared to be in direct violation of a long-term
antitrust agreement ASCAP has with the DOJ, given ASCAP's massive market power. Some in our comments suggested it was crazy to suggest this move violated the antitrust agreement, but a court has basically
ruled strongly in favor of Pandora, noting that it goes against the agreement to selectively remove songs from the blanket license, and allowing Pandora to continue to stream such songs. Basically, the court rules that the consent decree from the antitrust fight means that ASCAP can't divide up the various copyrights to separate out things like "new media rights," but rather if it has a song in its catalog, it must license it under its blanket license.
ASCAP’s argument is predicated on the Copyright doctrine of “divisibility of rights” within a copyrighted work. It is true that “[t]he Copyright Act confers upon the owner of a copyright a bundle of discrete exclusive rights, each of which may be transferred or retained separately by the copyright owner.” But while the Copyright Act allows rights within works to be alienated separately in general, [the consent decree] imposes restrictions beyond those imposed by the Copyright Act on ASCAP. [The consent decree denies] ASCAP the power to refuse to grant public performance rights to songs to particular users while, at the same time, retaining the songs in question in its repertory.
I await ASCAP's next press release insisting that Pandora is the one playing games....
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