LOS ANGELES – Internet radio leader Pandora Media Inc. said Wednesday that it won a court battle with the music publishing society known as ASCAP in a ruling that should help it lower its royalty payments.
The ruling only impacts the royalties Pandora pays to songwriters – a fraction of the total since royalties for performers are about 13 times larger. But the decision marks an incremental win in its larger battle to contain growing costs.
Pandora has said it pays about 4.3 percent of its revenue in songwriter royalties to groups including ASCAP, which distributes them to major publishers like Sony/ATV and Warner/Chappell.
Starting two years ago, major publishers began to withdraw rights from Pandora, forcing it to reach separate deals.
Judge Denise Cote’s ruling in a federal district court in New York on Tuesday said such withdrawals violate the conditions ASCAP has acted under since a 1941 agreement with the Justice Department to prevent anticompetitive behavior.
“We welcome the court’s decision,” said Chris Harrison, Pandora’s assistant general counsel, in a statement. “We hope this will put an end to the attempt by certain ASCAP-member publishers to unfairly and selectively withhold their catalogs from Pandora.”
ASCAP, the American Society of Composers, Authors and Publishers, said the ruling does not undermine its position that songwriters should be paid fairly by Pandora, an issue to be addressed in a December trial.
“Songwriters deserve fair pay for their hard work,” said ASCAP CEO John LoFrumento. He said the society looks forward to the Dec. 4 trial that could rewrite a five-year deal in place since January 2011, where it will “demonstrate the true value of songwriters’ and composers’ performance rights.”
As one example of the value of songwriters’ work, ASCAP negotiated higher royalties for Apple’s iTunes Radio, a streaming service that launches Wednesday and will compete with Pandora.
While Pandora said the ruling “has no impact on the royalty rates Pandora currently pays to ASCAP,” Pandora spokeswoman Mollie Starr said it did annul agreements Pandora reached separately with Universal Music Group and BMG/Chrysalis Music after they withdrew rights for Pandora in July.
With Tuesday’s ruling, Pandora will now pay Universal and BMG the lower ASCAP rate.
Starr said Pandora will continue to honor a separate rate it negotiated with Sony/ATV, which bought EMI Music Publishing in June 2012, through the end of the year.
A spokesman for Universal did not immediately respond to a message seeking comment. A BMG spokesman had no immediate comment.
Pandora shares rose 50 cents, or 2 percent, to $25.69 on Wednesday.