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If Pandora was looking for a fight due to its purchase of a South Dakota terrestrial radio station, it’s certainly going to get one. (Or maybe several, for that matter.)
Major record label BMI is planning to sue Pandora over its attempt to grab lower music licensing fees that rival services like iHeartRadio pay, according to a Billboard report that cites unnamed sources familiar with the matter.
iHeartRadio is owned by Clear Channel, the biggest owner of terrestrial (aka traditional) radio stations in the country. Clear Channel doesn’t have to pay music license owners a fee for anything played on those terrestrial stations, but it does pay a 1.7 percent advertising rate negotiated by the Radio Music Licensing Committee (RMLC) for all music that’s streamed digitally. Pandora, on the other hand, has a 4.1 percent rate, presumably because its not a terrestrial radio business. Pandora bought the South Dakota radio station — a move it announced yesterday — in an attempt to get the same rate as its rivals.
While BMI was previously in negotiations to lower those rates, the music label has now left the table. Instead, it plans to file a lawsuit over Pandora’s claim to lower licensing fees. Although, since Pandora’s purchase is mostly symbolic and likely won’t affect its revenue in the short-term, it’s hard to say how much good a lawsuit will really do. At the very least, Pandora seems to have ruined any chance of reaching a lower licensing rate through negotiations.
Other music industry groups have expressed outrage over Pandora’s purchase. For instance, National Music Publishers Association (NMPA) chief exec David Israelite spoke out against Pandora during the organizations regular meeting in Manhattan last night.
“Pandora is going to pursue lawsuits and gimmicks,” Israelite said at the meeting. “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.”
We’re reaching out to both BMI and Pandora for further comment and will update this post with any new information we find out.