BMI wants Pandora to pay the piper. Or at least pay the piper a little more.
Music licensing company BMI filed suit against internet music streaming service Pandora on Thursday, demanding higher licensing fees and accusing Pandora of trying to do an end-run around BMI's licensing rate structure.
In the suit, filed in U.S. District Court in southern New York, BMI contends that, despite Pandora and other streaming services' growing share of the music-listening marketplace — and accompanying increase in advertising revenues — Pandora has been paying an unreasonably low licensing rate, and in fact has been lobbying Congress to lower its fees even further.
The suit contents that Pandora and services like it differ radically from traditional terrestrial radio stations, if for no other reason than the sheer volume of offered songs.
"Pandora does not play one song at a time, as do old-fashioned terrestrial radio stations," the suit reads. "By 10 a.m. every morning, Pandora has already performed 200 million songs, as compared with the hundreds of songs played by an average radio station per day."
But BMI contends that Pandora is actually trying to take advantage of a break that it gives to radio stations. Because of the significant revenue generated by radio licensing fees generated from terrestrial broadcasts, BMI provides a lower "new media transmissions" rate for radio stations.
In its suit, BMI says Pandora purchased Rapid City, S.D., radio station KXMZ-FM in "an open and brazen effort to artificially drive down its license fees."
"Pandora's stunt makes a mockery of performing rights licenses and the rate court process," the suit reads. "The BMI Radio Station License governs terrestrial radio station broadcasts. It does not cover performances by a primarily internet-based music service that happens to own a single radio station in a city with a total population that is less than 0.045 percent of Pandora's online membership."
BMI is asking that the court bring Pandora's licensing rate in line with agreements made between BMI and Spotify, BMI and Music Choice.
Spotify says that it looks forward to the court resolving the matter.
“Disputes regarding the reasonableness of fees between BMI and music users are adjudicated in Federal court just as disputes between ASCAP and music users," a spokeswoman for Pandora told TheWrap in a statement. "This process is required by the consent decrees both organizations agreed to after the U.S. Department of Justice sued them for anti-competitive behavior. We look forward to the court’s oversight of this matter.”
Pamela Chelin contributed to this report.