BMI thinks Pandora is trying to be crafty with its recent radio station purchase in South Dakota
Broadcast Music Inc. (BMI) has sued Internet radio company Pandora for trying to lower the royalty rates it pays by buying a small radio station.
BMI filed the lawsuit at the U.S. Southern District Federal Court in New York yesterday. It's even seeking help from a federal rate court, which will decide how much Pandora will pay BMI members in royalty rates.
This situation stemmed from Pandora's purchase of a small radio station -- KXMZ-FM -- located in Rapid City, South Dakota. Pandora announced the purchase just two days before BMI launched the lawsuit.
BMI is accusing Pandora of buying the radio station so that it can enjoy the reduced royalty rates that terrestrial radio broadcasters receive. BMI gives terrestrial radio stations a bit of a break because of the higher fees these stations pay for on-air broadcasts. BMI said Pandora, on the other hand, is primarily an Internet service and shouldn't qualify for the discount that terrestrial radio stations receive just because it bought one tiny radio station in South Dakota.
"The action asks the court to set reasonable, market driven fees for Pandora after negotiations did not result in an agreement," said BMI. "BMI represents the public performance copyright interest of its affiliates when their works are played across all venues including the internet, cable, broadcast television and radio, satellite and in nightclubs, bars and other commercial establishments.
BMI said in the filing that it expects Pandora to claim that is no different than commercial broadcast radio now that it owns a radio station. The group currently has agreements with Pandora's rivals Spotify and Music Choice, in which the rates and terms are "the same as, or higher than, BMI's proposal to Pandora," it said in the filing.
Pandora pays less than some competitors and STILL can't make money...LMAO.
The BMI lawsuit states Pandora paid 4.1% of revenue to publishers last year, but has continued to seek a lower rate from ASCAP, even filing a lawsuit last year against the performance-rights organization. Pandora’s Q1 revenue was $125.5 million, a 55% year-over-year increase, and its total listener base has increased more than 33% in the past year.
David Israelite, chairman of the National Music Publishers Association, spoke out this week in response to Pandora’s attempt to avoid the 4.1% rate.
“Any shred of credibility that Pandora had as the songwriters’ partner is now gone,” he said. “Pandora has decided that instead it will pursue their business model through lawsuits and gimmicks, and will try to fraudulently sneak in the back door for a rate that wasn’t meant for them.”
Poor Pandora. Resorting to panhandling, begging and contrivances to make ends meet. Sorry, the business world does not function by giving other people's property away for free, and then complaining that the cost of giving away said property is too expensive, even after negotiating for much lower rates. Maybe Pandora should come up with a better business model instead of trying to get the government to further lower the rates they have to pay, or whining that intellectual property costs too much. They're getting what they deserve, and now you can add massive legal fees into their G&A expense. The "modest" savings garnered by this thinly veiled slight of hand will be easily offset by additional costs to fight BMI.