Why Is Aerosmith So Mad at Pandora?

After a legal setback, Steven Tyler is asking Congress to change the legal scene for songwriters.

Steven Tyler performs onstage at 'Howard Stern's Birthday Bash' presented by SiriusXM, produced by Howard Stern Productions at Hammerstein Ballroom on January 31, 2014 in New York City.
National Journal
Laura Ryan
April 3, 2014, 1:30 a.m.

Pan­dora re­cently won a key leg­al vic­tory in its on­go­ing leg­al battle with song­writers, but there’s no end in sight for the leg­al spat between the com­pany and the writers whose songs it plays.

At is­sue are the roy­alty fees that Pan­dora pays song­writers in ex­change for the rights to their mu­sic cata­logs. The Amer­ic­an So­ci­ety of Com­posers, Au­thors, and Pub­lish­ers — the coun­try’s old­est and largest per­form­ing rights or­gan­iz­a­tion — and Pan­dora have been bat­tling in court for over two years years over roy­alty rates.

The latest rul­ing came in March, when New York Dis­trict Court Judge Den­ise Cote de­cided that Pan­dora must pay AS­CAP 1.85 per­cent the com­pany’s an­nu­al rev­en­ue in ex­change for a blanket li­cense to the 100-year-old song­writers group’s mu­sic­al lib­rary.

At first glance, Cote’s de­cision keeps the status quo: Cote re­jec­ted AS­CAP’s ar­gu­ments for a high­er rate while also re­ject­ing Pan­dora’s re­quest to pay the lower rate that is awar­ded to to tra­di­tion­al AM/FM ra­dio.

That or­der leaves in place a leg­al frame­work dat­ing back to 1941, when the Justice De­part­ment set up a reg­u­lat­ory ar­range­ment that de­cides how much cus­tom­ers, such as ra­dio sta­tions or res­taur­ants, pay AS­CAP for the rights to play their cata­log of mu­sic in pub­lic. Un­der the or­der, AS­CAP is ob­lig­ated to is­sue a com­puls­ory li­cense to in­ter­ested parties, and if the two groups fail to ne­go­ti­ate a roy­alty rate, the rate is set by a fed­er­al judge. But in set­ting the rate, judges are bound by a set of para­met­ers that have thus far kept roy­alty pay­ments at a rate Pan­dora can stom­ach.

Cote’s 136-page de­cision, however, con­tained lan­guage sid­ing strongly with Oak­land, Cal­if.-based Pan­dora — and leav­ing the song­writers plenty of reas­on for con­cern. She had some harsh words for mu­sic ex­ec­ut­ives, writ­ing that the “driv­ing force was the mu­sic pub­lish­ers’ envy at the rate their sound re­cord­ing brethren had ex­trac­ted from Pan­dora.”

In­deed, song­writers have plenty to envy about their per­form­ing peers. Pan­dora pays re­cord­ing artists and re­cord la­bels about 50 per­cent of its rev­en­ue, while only pay­ing song­writers and pub­lish­ers about 4 per­cent total (AS­CAP is one of three ma­jor per­form­ing-rights or­gan­iz­a­tions).

And the mu­sic in­dustry is none too pleased about it. Cue Steven Tyler, the Aer­o­s­mith front man turned roy­alty-rate war­ri­or.

Tyler was in Wash­ing­ton last week to speak up against the gulf in roy­al­ties rates, and he came to Cap­it­ol Hill with a three let­ter mes­sage: “W-T-F.”

“If the laws con­tin­ue go­ing the way they are, [song­writers] will nev­er be paid fairly for [their] own par­ti­cip­a­tion,” Tyler said at an event hos­ted by the Na­tion­al Mu­sic Pub­lish­ers As­so­ci­ation. “So people, for­give me for be­ing a little jaded about the state of copy­right.”

Song­writers are step­ping up ef­forts to get at the root of the prob­lem: chan­ging the reg­u­lat­ory sys­tem dat­ing back to WWII.

“[The Pan­dora] rul­ing con­firms what we already knew - song­writers will nev­er be paid fairly as long as they must labor un­der World War II era con­sent de­crees,” NMPA Pres­id­ent and CEO Dav­id Is­rael­ite said in a state­ment. 

And law­makers, at least a few of them, are listen­ing. Re­pub­lic­an Rep. Doug Collins of Geor­gia in Feb­ru­ary in­tro­duced le­gis­la­tion that would al­low fed­er­al courts more flex­ib­il­ity in de­cid­ing li­cens­ing fees, like let­ting judges take in­to con­sid­er­a­tion how much re­cord la­bels re­ceive when set­ting rates for pub­lish­ers.

House Ju­di­ciary Com­mit­tee Chair­man Bob Good­latte is also lead­ing a com­pre­hens­ive re­view of copy­right laws, al­though re­form would likely take years.

In the mean­time, Pan­dora still isn’t in the clear. The In­ter­net ra­dio pos­ted a profit at the end of 2013 for the first time in a few years. Pan­dora blames li­cens­ing pay­ments for their on­go­ing fin­an­cial struggles, re­cently cit­ing rising pay­outs to re­cord la­bels as the reas­on be­hind the com­pany’s de­cision to raise sub­scrip­tion fees. 

While the com­pany es­caped a blow in the AS­CAP suit, it still faces a cloudy leg­al fu­ture. Pan­dora is locked in a sim­il­ar leg­al fight with Broad­cast Mu­sic Inc. — the second-largest per­form­ing-rights or­gan­iz­a­tion, bet­ter known as BMI, bound by a sim­il­ar con­sent de­cree that has han­di­capped AS­CAP — that is also seek­ing a big­ger piece of Pan­dora’s fin­an­cial pie.

And even if Pan­dora se­cures an­oth­er win, some are con­cerned that ma­jor pub­lish­ers, like Sony/ATV and Uni­ver­sal, could de­cide to pull their mu­sic cata­logs from the AS­CAP or BMI en­tirely in a last-ditch ef­fort to get out from un­der the con­sent de­cree to ne­go­ti­ate fees dir­ectly with Pan­dora.

“If we can’t se­cure ad­just­ments to the con­sent de­crees, which were last mod­i­fied be­fore the in­tro­duc­tion of the iPod, we’ll have no choice but to con­sider some rad­ic­al steps in or­der to en­sure our writers are fairly com­pensated in the rap­idly chan­ging mar­ket­place,” Zach Horow­itz, chair­man of the Uni­ver­sal Mu­sic Pub­lish­ing Group, told the New York Times

If that hap­pens, it would mean either a big leap in li­cens­ing fees or a smal­ler mu­sic lib­rary for Pan­dora. 

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