Legacy Recording Industry Claims Pandora Is Playing A 'Sick Joke' In Seeking The Same Rates Others Pay

from the really-now? dept

The ability of the record labels and RIAA front groups to flat out lie about the internet is really quite incredible. There's been some buzz recently about the crazy fact that Pandora just bought a small terrestrial radio station in South Dakota. Now, you might wonder, why would an innovative company that basically seems to be focused on making terrestrial radio stations obsolete need to own such a station... and Pandora is rather upfront in its answer: because the music collections societies, like ASCAP and BMI discriminate against internet companies, in direct violation of an antitrust agreement that ASCAP signed. Furthermore, ASCAP not only won't offer Pandora the same rights, but it engaged in highly questionable negotiation practices, such as refusing to tell Pandora what songs it was pulling the rights to, such that Pandora risked huge statutory awards for copyright infringement:
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ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work.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. Faced with such potential liability, Pandora negotiated an agreement that resulted in increased rates. Shortly thereafter, additional major publishers took steps to withdraw their catalogs from ASCAP, again with respect to Pandora.

ASCAP created additional ways to circumvent its antitrust consent decree. Our motion also describes how ASCAP refused to provide Pandora a license under the same terms as the iHeartRadio service, for only one reason: iHeartRadio is owned by a terrestrial broadcaster.
All of this is in direct violation of the antitrust agreement ASCAP has with the DOJ, in which it's supposed to make sure that ASCAP can't use its monopoly power over compositions to discriminate against certain players. Yet, ASCAP is clearly trying to discriminate against internet streaming services, by charging them significantly higher rates.

So, Pandora has bought the station in order to get the same rates as other streaming radio stations that are owned by terrestrial stations. As Public Knowledge points out:
This is a perfect example of the twisted incentives and strange results we get from a music licensing system that is based on who wants a license instead of just what they want to do with the music they’re using. This makes no sense. The law should treat like uses alike. Regardless of how high or low you think performance royalty rates for webcasting should ultimately be, there is no logical reason to give preferential rates to certain companies just because they arrived at the negotiation table first.
And this is only about composition rates, not even getting into the rates that Pandora has to pay for sound recordings, which is infinitely higher than terrestrial radio. Buying the radio station won't help on that front, because the internet streams are charged differently than terrestrial radio no matter who owns it, but just the fact that it's paying different rates than everyone else seems ridiculous.

And, of course, the incumbents try to twist all of this. First up, we see that BMI has sued Pandora for buying the radio station. I'm not joking. I can't see on what possible grounds a lawsuit would make sense. Are they saying it's illegal for a company to seek to get the same rates that BMI offers radio stations?

But, even worse than that is the reaction of the RIAA front group, MusicFirst, a lobbying group set up by the RIAA and SoundExchange solely for the purpose of lobbying against internet companies and seeking ever higher rates for those companies, to make sure no internet music company can stay in business. That this is short-sighted and stupid never seems to occur to MusicFirst, who is always quick with a blog post arguing that internet companies are up to no good. In this case, it accuses Pandora of playing a "sick joke" in making this purchase:
This has to be some kind of sick joke. Pandora bought an FM radio station to game the system in order to pay songwriters less?

Pandora continues to find new ways to give artists and songwriters a raw deal from the bottom of the deck. In their race to the bottom to see how little they can pay music creators, they have stooped to misleading legislation, bait and switch petitions, and now fronting as an FM radio station.
Oh really now? It's a "sick joke" to try to get the same license rate that ASCAP and BMI offer terrestrial radio stations? How so? It's a "sick joke" that the company doesn't think it's fair for ASCAP and BMI to discriminate against internet streaming radio services? The only "sick joke" is MusicFirst pretending to represent artists as it seeks to kill off new and innovative internet services that are helping artists build bigger fan bases. No wonder the RIAA-funded MusicFirst has to resort to silly claims like this. The RIAA has never wanted to adapt to an internet world, and is, once again, looking to spread completely bogus propaganda in an attempt to stifle internet progress, which tends to help independent artists, such that they don't need the RIAA labels any more. What's incredible is that the RIAA, which set up MusicFirst, has it pretend to represent the interests of "artists" when it's never been anything more than a big-label front group. If there's any "sick joke" it would be MusicFirst's pretend concern for artist's rights, that just so happen to align entirely with the interests of the big labels.

Meanwhile, David Israelite, the lobbyist for the music publishers has piled on as well, claiming that this is about Pandora "going to war with songwriters."
David Israelite, CEO of the National Music Publishers Association (NMPA), tonight interrupted his state-of-the-industry speech at the group's annual meeting in Manhattan to lash out at Pandora's decision to acquire a radio station in South Dakota. "Pandora is going to pursue lawsuits and gimmicks," Israelite told the hundreds of songwriters and composers in attendance. "Pandora is hoping to fraudulently sneak in the back door. Any shred of credibility that Pandora had is gone. They are at war with songwriters "
Once again... huh? Asking for the same rates that radio pays to stream music online is "going to war"? How does that compute? It's as if the music publishers, collection societies and the RIAA can't help but lie because they have such distaste for Pandora actually figuring out a service that people like online, when they've spent so many years trying to ensure that online services fail. If there's any "war" going on here, it's the legacy recording industry against online services that fans seem to love.

Filed Under: discrimination, licensing, lobbyists, music publishers, radio, recording industry, royalties, streaming
Companies: ascap, bmi, musicfirst, nmpa, pandora, riaa

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  1. icon
    Togashi (profile), 14 Jun 2013 @ 12:01pm

    Re: Re: Internet stations have THE WHOLE WORLD for market.

    Sources have also quoted said business experts as saying, "What sick man sends babies to negotiate with me?"

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