Pandora Files Lawsuit Concerning Payouts to Artists

Barely a month ago after Pandora (News - Alert) announced that it is paying out annual steady incomes to top artists on Pandora in hundreds of thousands of dollars, the Internet radio service has filed a suit against American Society of Composers, Authors and Publishers (ASCAP) claiming that it is paying exorbitant royalty rates compared to other forms of digital radio.

The lawsuit is intended to bring down the payouts to “reasonable” fees for streaming songs governed by ASCAP on Pandora. Pandora has been pushing for lower fees for over a year now, as the ASCAP pushes to raise these rates after an agreement with all the major radio groups, for both broadcast and online, was reached earlier this year. According to a Pandora spokeswoman, the company is “initiating a process that has been in place for decades to resolve royalty disputes with ASCAP.”


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Internet radio stations, like Pandora, are expected to pay a fee for the right to stream music on their websites. With ASCAP representing over 435,000 U.S. artists, songwriters and music publishers, the ASCAP can pretty much determine what these artists need to be paid. Pandora terminated its license with ASCAP in October 2010. The ASCAP, however, was expected to continue providing content to Pandora for an undisclosed period. According to Pandora, under the U.S. law, it is guaranteed the right to stream sound recordings.

Currently, Pandora accounts for only 6.53 percent of all radio listening in the U.S. It therefore seems fundamentally unfair that other forms of radio that have much larger shares should be paying substantially less to artists. Clearly, this is not a sustainable business model for Pandora.

According to Pandora, Internet radio should be allowed to operate on a level playing field. The National Music Publishers’ Association (NMPA) said that “Pandora’s business model is based entirely on the creative contributions of those songwriters” and the lawsuit was outrageous and adds insult to injury by trying to reduce the already nominal payout while Pandora’s founders are pocketing millions.