Apple’s iTunes Radio does not justify Pandora rate hike, judge Cote says in major royalty decision

“A federal judge sided with internet radio service Pandora over the music industry in a bitter fight over songwriting royalties Wednesday, after concluding that Pandora is more akin to regular radio than other music services like iTunes Radio and Spotify,” Jeff John Roberts reports for Gigaom. “In a decision published Wednesday in New York, U.S. District Judge Denise Cote concluded that Pandora should continue paying a royalty rate of 1.85 percent of its annual revenues, and that the 3 percent music publishers had sought was not ‘reasonable.’ “While the parties announced the numbers on Friday, the judge only published her 136-page decision this week after Pandora, Apple and others had an opportunity to redact confidential information.”

“Even though it falls short of the 1.7 percent Pandora had requested, the company is likely pleased with the 1.85 percent figure; that is what it currently pays, and the decision lifts a cloud of uncertainty at a time when Pandora is struggling to become profitable,” Roberts reports. “The court also rejected the music companies attempt to use Apple, which launched a radio service of its own late last year, as a royalty model. While Apple is rumored to be paying ASCAP a 10 percent royalty rate, Judge Cote ruled that this amounts to an apples-to-oranges comparison, in part because the service is new and because Apple is using it promote its hardware products.”

“The ruling in favor of Pandora may further embitter certain songwriters who blame digital musical services for undercutting artists’ ability to make a living,: Roberts reports. “The bottom line is that the ruling puts Pandora on about equal footing with other radio stations when it comes to paying ASCAP, but the music royalty system still appears deeply distressed and uneven.”

Much more in the full article here.

32 Comments

    1. It is when there is a contract and private parties disagree about the rate of royalties owed. This is why we have federal courts to resolve cases and controversies. See Article III of the Constitution.

      1. In Chisholm v. Georgia, 2 U.S. (Dallas 2) 419 (1793), the Supreme Court held that states were not immune from lawsuits by individuals due to the Supreme Court’s Article III jurisdiction over them. The Eleventh Amendment reversed this decision, and prevents a state from being sued in a federal court by a citizen of another state.

        1. What state government is being sued here? What are you talking about? Pandora is suing an association of composers and artists.

          Can you even read this message?

            1. This court is resolving a disagreement between two private parties. See Article III of the Constitution.

              One party sued another, claiming they have been wronged. This is why we have courts.

            2. Clearly, yes, when federal courts have diversity jurisdiction or the contract someone implicates a federal question.

              Though, there are some radicals on this site.

            3. @botvinnik

              So I assume that if the electric company just tripled your rate you would agree that the judicial system has no right to set prices charged by a private company.

              ….better hope your electric company is not reading your comments. If your rates triple, please stick to your beliefs and pay them.

            4. “…and because Apple is using it promote its hardware products.”

              This is the part that concerns me the most. The judge is allowed to take the company’s “intentions”, stated or implied, into consideration when setting royalty fees???

              I’m pretty sure this falls outside the judge’s realm.

        1. Hey Bot- it was very amusing reading the responses to your comments both above and below. Personally, I have to side with your opponents. It seems clear that this is an example of the courts settling a contract dispute between private parties and not the courts dictating prices for products.

          This is a simple thing to see and understand, but you just don’t see it or understand it.

          The fact that you cannot connect the dots on this, plus your fervent, insult spewing, insistence that you are right, really shines a light on the kind of person you are. It lifts the curtain on your skewed perception of the political landscape, your extreme solutions to perceived political problems, and your arrogant insistence that you are superior and always correct.

          Your behavior on MDN is almost always skewed and rude and self-aggrandizing. Why don’t you help us all out and give it a rest.

    2. An inherent part of your problem understanding this seems to be that you believe the U.S. has a “judicial system”. (Hell, you might even believe that the U.S. is supposed to have a “justice system”.) It doesn’t. It have a *LEGAL* system.

      The legal system is set up such that if the two parties disagree over royalties and one sues the other over this disagreement (and they cannot work it out through mediation, or in some cases arbitration) the judge who presides over the lawsuit absolutely has LEGAL authority to set the royalty rate. It is the way the U.S. LEGAL system works.

      You may not believe that it is the way it is *supposed* to be, but it is the way the system in the U.S. actually works.

      You may not believe Judge Cote’s ruling is correct. (I don’t.) You may not agree with her rationale she uses to come to her final conclusion and ruling. (I don’t.) But, it does not change the simple fact that in the U.S. LEGAL system she has the authority to make the ruling she has made. It does not change the fact that she has the LEGAL authority to enforce it.

      Either party also has the right to appeal. If either party appeals, and a higher court hears it, then that court has the LEGAL authority to keep the ruling the same or change it. It is how the system works. It just is. Saying it is not so accomplishes nothing. If you don’t like the way the system works, start diligently, actively working to change it.

      1. Exactly. Without the legal system, we’re back to dueling in order to settle our disagreements.

        But, judging by his comments, he may be waxing nostalgic for such anarchy

  1. I really can’t stand her, and hope that she dies of cancer, but that said, Pandora is essentially a form of radio, with advertising. The fact that songwriters can’t make money from Pandora is the same as them not making money from radio. It’s called advertising. You don’t really make money from album sales as an artist unless you own your own label, you make your money from concert tours.

    1. True indeed, although I have to disagree with you on the radio side, radio has a shuffle of a small amount of songs while pandora might play your whole album if not most of your hit songs.

  2. It’s pretty unusual for a company only to have 1.85% of their revenue represented by the cost of obtaining the very thing they sell to their customers.
    When there is this kind of inequality in the profit pool of industries such as farmer goods, apparel, etc there are protests in favour of the under compensated producer, especially if that small amount then has to be shared amongst thousands of musicians who get a pittance each for their work.

    1. In this case, “pittance” apparently = 0.003 or 0.004 cents per play. To be shared amongst the whole band and their manager. So it takes a LOT of plays to earn the price of a cup of coffee.

      I really don’t know why musicians bother to record albums any more.

  3. ninetimesoutoften: not really. As pointed out in the article, radio pays an even lower rate than Pandora does. Judge Cote (not surprisingly) contradicts herself in declaring that Pandora is essentially a radio station (correct) but sets a higher royalty than a radio station. But on this occasion her pre-determined solution falls mostly on the side of justice. ASCAP is just being greedy (given the industry standard).

    There’s definitely a case to be made that the overall radio rate is too low, but if that’s the case then a rise should be applied equally, not selectively.

    1. I think the decision was not to allow the ASCAP to increase the rate Pandora is charged by the reasoning that they should be considered a radio station. So basically instead of specifying a reduced rate she simply denied the royalty rate increase. Not sure if you can consider that ‘setting’ a rate since it was already at 1.85%.

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