Appeals Court Rejects Labels' Collusion Scheme To Try To Force Pandora To Pay Higher Rates

from the nice-try,-but-no dept

Last year, we wrote about a somewhat crazy lawsuit involving ASCAP, Pandora, and various record labels that was officially about trying to force Pandora into paying higher rates. There were a lot of moving parts in the case, but a key point was that various publishers (owned by the major record labels) pulled a neat little trick in which ASCAP allowed the publishers to “partially remove” their catalog, such that ASCAP could still license the catalog to traditional organizations, but not to “new media” companies (i.e., Pandora). Then, the publishers tried to “negotiate” independently with Pandora, and by “negotiate” I mean “refuse to tell Pandora what songs were no longer covered by ASCAP and then threaten a massive lawsuit if Pandora accidentally streamed any of those songs.” Under such pressure, Pandora caved and agreed to pay much higher rates to those publishers, and ASCAP then spun around and tried to argue that those new rates were much more representative of “market rates” leaving out how the whole thing was planned together as a group as a form of collusion. Thankfully, the district court recognized what was going on, and mostly sided with Pandora, raising the rates slightly, but nowhere near as much as ASCAP and the publishers sought.

ASCAP and the publishers appealed, but the appeals court has now easily sided with Pandora, seeing no problems with the lower court’s rulings. The ruling [pdf] doesn’t get into the whole collusion bit, but does note that allowing publishers to do this “partial removal” trick quite clearly violated the letter and spirit of the ongoing “consent decree” that ASCAP has with the Justice Department, to guarantee that it’s not violating antitrust law. The consent decree says that if someone wants to license music that ASCAP has the right to license, ASCAP has to provide that license. Since it makes no distinction among different kinds of services, ASCAP can’t just make up that part:

Appellants contend that publishers may withdraw from ASCAP its right to license their works to certain new media music users (including Pandora) while continuing to license the same works to ASCAP for licensing to other users. We agree with the district court?s determination that the plain language of the consent decree unambiguously precludes ASCAP from accepting such partial withdrawals. The decree?s definition of ?ASCAP repertory? and other provisions of the decree establish that ASCAP has essentially equivalent rights across all of the works licensed to it. The licensing of works through ASCAP is offered to publishers on a take?it?or?leave?it basis. As ASCAP is required to license its entire repertory to all eligible users, publishers may not license works to ASCAP for licensing to some eligible users but not others.

Basically, the consent decree is quite clear: if you have the right to license the music, you have to license it to all-comers, and you can’t make up artificial classifications that you won’t license it to. As the ruling notes, it seems what ASCAP and the publishers are really trying to do is to rewrite the consent decree on the fly and have the court system sign off on it. The court will not do that:

Appellants would have us rewrite the decree so that it speaks in terms of the right to license the particular subset of public performance rights being sought by a specific music user. This reading is foreclosed by the plain language of the decree, rendering Appellants? interpretation unreasonable as a matter of law

Of course, ASCAP, the publishers and the labels have been lobbying quite hard to get the DOJ and/or Congress to throw out the consent decree altogether, so that they can go back to colluding in this matter to try to jack up rates. Expect those efforts to expand even more given this ruling.

Finally, the court also says that the new rates set by the lower court are perfectly fine and it sees no reason to change those rates, no matter how much whining ASCAP might do about the new rates.

Having reviewed 1 the record and the district court?s detailed examination thereof, we conclude that the district court did not commit clear error in its evaluation of the evidence or in its ultimate determination that a 1.85% rate was reasonable for the duration of the Pandora?ASCAP license. We likewise conclude that the district court?s legal determinations underlying that ultimate conclusion? including its rejection of various alternative benchmarks proffered by ASCAP?were sound.

Basically: just because you say the rates are unfair doesn’t make them unfair. Either way, given the way ASCAP and the publishers have whined and complained about this entire process, expect that to reach a new level of ridiculousness in the near future, with a bunch of bogus talk about how absolutely unfair life is for them, even as they rake in tons of money.

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Companies: ascap, emi, pandora, sony music publishing, universal music

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Comments on “Appeals Court Rejects Labels' Collusion Scheme To Try To Force Pandora To Pay Higher Rates”

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Brian (profile) says:

“Powerful corporate interests, like Pandora, are determined to stand in the way of meaningful music licensing reform so that they may continue to shortchange songwriters.” — ASCAP CEO Beth Matthews response (found on their website)

Interesting that she’s playing the “powerful corporate” card against Pandora… I guess I was wrong about the (weak!?) music labels being the ones that “shortchange songwriters”…

PaulT (profile) says:

Re: Re:

It’s the usual “we pick the relevant facts and skirt around those that are inconvenient to what we’re currently saying” gambit.

She’s right in the sense that Pandora is “corporate” and ASCAP is not, since ASCAP is a non-profit that nominally represents songwriters. But, she ignores the fact that most of the people represented are signed to contracts with some of the biggest corporate interests on the planet, each of which has income many times larger than Pandora.

It’s a case of hoping that the call to emotion stops people from recognising that most of the corporate interests are on their side. Sadly, some of the people who are in charge of making the laws fall for this crap. Thankfully, not this time.

Anonymous Coward says:

what a shame that there aren’t more rulings arrived at in similar manners so as to blow the whole entertainment industries method of working and earning to pieces. the biggest set back for that are the members of Congress who keep accepting ‘campaign donations’ from those industries and then introduce new laws or ramp up old ones that allow the ridiculousness of the last few decades to only get worse! you cant stop bad actions by an industry if they are condoned and enticed by those who could actually make things so much more fair. in fact, they could make new laws that didn’t stop the industries from earning money by the licensing but could put sensible levels of earnings and hopefully, in doing so, it would entice new blood into the ring! it could sure as hell do with some! those in their at the moment are so screwed up, they need to lean constantly on the ropes to be able to move round!!

Jay (profile) says:

Re: Re:

The RIAA is losing influence it seems. I think over the years, they’ve pushed too far and other corporate interests have more power. Now they’re using it in courts. As the music industry goes down and technology has more power and clout, it’s changing the influence in court.

But don’t worry, the public is still going to be screwed in regards to copyright…

That One Guy (profile) says:

Re: Re:

What are you talking about, the article is clearly not on the side of the recording or collection agencies, and is in fact talking about how their attempted extortion scheme got slapped down.

Oh, oh now I get it, you must be one of those people who think collection agencies and record labels are interested in actually paying artists, rather just just giving themselves huge stacks of money while telling the artist they’re not popular enough to get a cut of the money collected, or ‘haven’t recouped yet’ despite having sold several million CD’s.

PaulT (profile) says:

Re: Re:

Whereas industry shills cheer when they break the legal services that are paying them money, be that by forcing them to pay unsustainable fortunes through their greed, crippling services like Pandora so that they can only service a fraction of the global market, or preventing them from streaming the music their listeners actually want to listen to.

Even if you were right about this money going directly to artists (and you’re not, not by a long shot), you still support people who are intent on killing the very businesses that are trying to pay them more. Then whine that blocking people from consuming their product legally hasn’t magically raised them huge fortunes.

Karl (profile) says:

Re: Re:

Mike Masnick loves to cheer when artists make less money.

You know the real irony in all of this? Because of ASCAP’s collusion with the major publishers, artists ended up getting a lower rate than they would have otherwise.

Before the majors started whining, Pandora had already made a “handshake deal” with ASCAP, which was for a higher rate than the one that they eventually got. Because of their collusion with the labels who were (illegally) making direct deals, Pandora had to go to rate court, which issued the current rate.

Also, I notice that you ignore the fact that terrestrial radio stations pay less than Pandora – for the same service: non-interactive streaming over the Internet. (That’s why Pandora is buying a radio station, a move that has just gotten approved: they want the same RMLC rates that ASCAP gives to terrestrial radio.)

So, if you want to know who to blame for the lower rates – it’s ASCAP and the major publishers.

Karl (profile) says:

DOJ and Consent Decrees

Of course, ASCAP, the publishers and the labels have been lobbying quite hard to get the DOJ and/or Congress to throw out the consent decree altogether, so that they can go back to colluding in this matter to try to jack up rates. Expect those efforts to expand even more given this ruling.

They’ve already been very active on this front. And the DOJ appears to be listening:

That One Guy (profile) says:

Re: DOJ and Consent Decrees

Brilliant, so they’re basically thinking about gutting pretty much the only thing that keeps ASCAP from wielding monopoly power due to their position, by legalizing the strong-arm tactics that they and the labels tried to pull on Pandora.

As if we really needed any more evidence that the DOJ doesn’t give a damn about the people, and only cares about serving the major corporations.

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