Pandora purchases FM radio station amid battle with songwriters

In the opinion piece, Harrison said Pandora was compelled to purchase the over-the-air radio station so it could qualify for the same license under the same terms as other Internet radio competitors, including Clear Channel-owned iHeartRadio. These stations have a blanket license that allows them to play any music from the ASCAP song catalog.

Additionally, Harrison said Pandora has filed a motion in a New York federal district court against ASCAP for "discriminatory treatment" against the company and other Internet radio services.

The motion—which has not been made public yet—alleges that ASCAP “has violated the terms of its antitrust consent decree with the Department of Justice” and has created an unlevel playing field for Pandora.

In particular, Harrison said the motion 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.” A terrestrial broadcaster plays songs over-the-air rather than online.

This move provided the impetus for Pandora to purchase the Rapid City, South Dakota radio station. In effect, Pandora can now qualify for the same blanket license “under the same terms as our competitors,” Harrison said.

These developments mark Pandora’s latest shots across the bow in its ongoing feud with ASCAP. Pandora filed a petition in a New York federal court this past November that asked for the judge to set a reasonable license fee for streaming songs from ASCAP.

ASCAP members write the music and lyrics of songs and include famous names like Duke Ellington, Beyonce, Hans Zimmer and Henry Mancini.

In the opinion piece, Harrison contends ASCAP’s rules were amended to allow individual music publishers to selectively withdraw the media rights for their song catalogs from the organization.   

Last year, music publisher Sony/ATV withdrew its media rights from ASCAP, “forcing Pandora to negotiate a direct agreement against a ticking clock” so it could continue to stream songs from the publisher's catalog, according to Harrison.

“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ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work,” Harrison said.

If Pandora had played a song from the list of tracks that were being withdrawn, the company would be at risk for paying hefty copyright infringement damages, he added.

Pandora negotiated an agreement with Sony/ATV, but Harrison said it “resulted in increased rates.”

“Shortly thereafter, additional major publishers took steps to withdraw their catalogs from ASCAP, again with respect to Pandora,” Harrison said.

Pandora has waged battles against other sectors of the music industry in Washington.

Last year, Pandora actively lobbied for a bill that would modify the royalty-setting rules for Internet radio stations. The bill would have placed Internet radio stations like Pandora on the same royalty standard as cable and satellite radio services— which Pandora believes will lower the royalty fees it pays to recording artists and music labels for streaming the sound recordings of their songs over the Internet.

The Oakland, Calif.-based company has lamented that while its user base continues to grow, it has struggled to maintain profitability because the fees it pays to compensate artists and labels for streaming their songs online are higher than other digital radio services.

The National Association of Music Publishers (NMPA) has argued that songwriters are frustrated with Pandora because roughly four percent of the company’s revenue goes towards compensating them for their music, while over half of its revenue is allocated to paying recording labels and artists. The trade group contends Pandora underpays songwriters relative to the fees it pays to compensate artists and labels for the sound recordings of their songs.

The NMPA blasted Pandora's latest move in its battle with ASCAP.

"This is another sad step in Pandora's escalating war against songwriters," said NMPA CEO David Israelite in an email. "While other digital partners are making voluntary deals, Pandora chooses to sue the very creators who make its business possible."

Earlier this week, Apple said it planned to launch a new "iTunes Radio" streaming service, which has been billed as a competitor to Pandora. Apple successfully struck licensing agreements with Warner Music Group and Universal Music Group for the service, according to Rolling Stone.

For its part, Pandora argues that it just wants to compete on a level playing field with other digital radio services.

“The status quo is a dead end for the vast majority of working musicians and the Internet is driving a sea change that will fundamentally shift the equation away from big industry players towards a more democratic and inclusive industry for both listeners and artists,” Harrison writes in the op-ed. “For this to become reality, Internet radio must be embraced – not discriminated against.”

This post was updated at 6:12 p.m.