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Pandora is facing off with the American Society of Composers, Authors and Publishers (ASCAP) in federal court today to determine how much money the online radio giant should pay for the use of their compositions.
Pandora pays 4.3 percent of its revenues to ASCAP publishers and songwriters. It pays about half its revenue to record labels and performers. The decision could have an impact on the evolving digital music industry.
Jason Bellini of The Wall Street Journal joins Here & Now’s Jeremy Hobson with details.
JEREMY HOBSON, HOST:
This is HERE AND NOW from NPR and WBUR Boston. I'm Jeremy Hobson.
Today, the online radio giant Pandora is in court in a case that could have a big effect on how much money Pandora will pay composers and publishers for their work. Pandora is facing off against ASCAP, the American Society of Composers, Authors and Publishers. And for more on all this, we're joined by Jason Bellini of The Wall Street Journal, who's with us from New York, as he is each week. Hi, Jason.
JASON BELLINI: Hi, Jeremy. Good to be with you again.
HOBSON: Good to be - have you here. And we should say that this is about writers and publishers, right? This is not about musicians or record companies.
BELLINI: That's right. The writers and publishers, they have their own deal, their own slice of the pie. Of course, the artists themselves have performed the music. And the music companies, they're making the bulk of the money in the music industry. But those people who write the songs, they want their part of it too.
HOBSON: Well, what is Pandora arguing in this case?
BELLINI: Well, what Pandora is saying is that we're the digital equivalent of a radio station, and we should be paying the same level of compensation to those songwriters as regular, terrestrial, traditional radio stations do. Whereas as ASCAP, who represents all of these songwriters, disagrees. ASCAP wants a bigger slice of Pandora's revenue. Now, the interesting about all of this is the government regulates what that price is. It's been regulating the price since 1941. And you have these rate court judges that set out the published rates that Pandora must pay. And the rates for streaming audio are currently low enough that the amount Pandora lays out for publishers and songwriters that's only 4.3 percent of its revenue. By comparison, Pandora pays record labels and performers roughly half of its revenue.
HOBSON: Well, what of Pandora's competitors, like Spotify or iTunes radio, do with this stuff?
BELLINI: Well, there's a distinction between what Pandora does and what some of these other services do and that is interactivity with - Pandora, there's isn't much interactivity. You choose an artist do a song that you like and then it creates a radio station for you, and you sit back and you listen. You don't have any choice, whereas you get more of a jukebox with some of these. And so what they do is when you - Spotify, for example, and iTunes says they negotiate directly with ASCAP. They direct - they negotiate directly with these - with the music companies and come up with the rate which is actually a lot higher than what is being paid right now by Pandora.
HOBSON: Well, how much of an impact would this have on its bottom line, for Pandora? Do we know what kind of an impact the - these fees that they're having to pay, this rate has for their moneymaking?
BELLINI: You know, we really don't know because we don't know what the judges are going to decide: how they're - how much - they may reduce the amount that Pandora has to pay. But, you know, I said before, it's only a fairly small percent of their revenue that they're paying out currently. What could be a really big mess for them is actually if they win because then you've got these artists - or I'm sorry - not the artists but the composers and the songwriters saying, we may just pull out of ASCAP and say, forget it. We'll figure out our own deal, but we're not going to except the rate that we're getting paid. And if that happens, then Pandora may have to reconsider everything, figure out, you know, make deals with all kinds - with a different organization. It could be a really big mess for them. They actually have to pull back its catalog.
HOBSON: And with the ruling - would a ruling like that have an impact beyond Pandora in the industry?
BELLINI: Well, it could have an impact on some of the newcomers. You know, you've got Beats. You know, that's the company founded by rapper Dr. Dre.
BELLINI: They're forming - they're launching a new service themselves. And there are other ones who are coming out of the woodwork, now, who are trying to be, you know, as this sort of this gold rush for - to be the online radio stations. And, you know, so it could have a big impact on them and what they're paying, going forward.
HOBSON: The big question for me is, when will Pandora realize that I don't live in New York anymore and stop giving me ads for, you know, Tri-State Honda. But that is for another show, Jason.
HOBSON: Jason Bellini of The Wall Street Journal, thanks so much.
BELLINI: Thank you.
HOBSON: This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.