Music-licensing organization BMI has filed suit against Pandora, asking a judge to impose royalty rates that are consistent with Internet-based streaming operations, not terrestrial radio stations.
The move comes after Pandora bought a South Dakota-based terrestrial radio station in an effort to secure lower royalty rates. Broadcast Music Inc. (BMI), however, said the purchase is nothing but a "stunt."
Buying KXMZ-FM was an "open and brazen effort to artificially drive down its license fees," BMI said in its suit, filed in New York district court.
Pandora did not immediately respond to a request for comment.
At issue are the royalty rates that Internet-based radio stations pay to the organizations that own the rights to the songs. Services like Pandora, Spotify, or Rdio pay groups like BMI or the American Society of Composers, Authors and Publishers (ASCAP) - which represents artists, songwriters, and publishers - for the right to stream their songs online.
Terrestrial radio broadcasters, however, have traditionally paid less in royalties than their Internet counterparts because exposure on radio often led to sales - and revenue - for BMI and ASCAP members.
Pandora has long argued that the discrepancy isn't fair, claiming that the royalty rates requested by publishers are far too high. It has unsuccessfully lobbied Congress on the issue for years, and even sued ASCAP back in November over what it considered to be unreasonable royalty rates.
Last year, BMI and ASCAP negotiated royalty rates with terrestrial radio stations that also have an online presence via the Radio Music Licensing Committee (RMLC) in a deal that runs through 2016. Since its own efforts to secure a reasonable rate with BMI and ASCAP have thus far failed and Congress hasn't taken any action, Pandora this week announced the purchase of KXMZ-FM and argued that it is now entitled to the rates negotiated with the RMLC.
BMI, however, is not having it. "Pandora's stunt makes a mockery of performing rights licenses and the rate court process," the group said in its filing. "The BMI Radio Station License governs terrestrial radio station broadcasts. It does not cover performances by a primarily Internet-based music streaming service that happens to own a single radio station in a city with a total population that is less than 0.045 percent of Pandora's online membership."
BMI is requesting that the court impose a royalty rate that is consistent with an Internet-only operation.
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