Big Loss for ASCAP in Pandora Rate Case

Angry JudgeASCAP has suffered a significant defeat in its rate court litigation against Pandora.  In that proceeding, Pandora sought to have its current ASCAP musical composition public performance license rate (1.85% of revenue) cut to the same 1.7% rate paid by terrestrial radio.  ASCAP, as it has in several recent digital music rate cases, sought an increase to 3% of revenue.

Judge Cote, who had previously ruled that the attempts by certain music publishers to selectively withdraw their catalogs from the ASCAP repertory (only for certain digital music streaming services) violated the consent decree and had no legal effect, issued the Court’s final rate decision on Friday.  Although the full decision was filed under seal until the parties have a chance to request redaction of confidential information from the decision, ASCAP has disclosed that the Court has kept Pandora’s ASCAP rate at 1.85%.

In what can only be described as a delusional press release, ASCAP attempted to spin the decision as only a partial loss, in that “Judge Cote’s decision does not fully adopt the escalating rate structure that ASCAP had proposed.”  ASCAP then goes on to claim that Judge Cote’s decision somehow proves that the rate court (and the antitrust consent decree governing the rate court) no longer work and must be changed (in other words, abolished).  Although full analysis must wait for the public release of the full rate decision, the bottom line rate result alone demonstrates that ASCAP is absolutely wrong on both counts.

First, the decision is a total loss for ASCAP, following several other recent total losses in rate court.  Judge Cote did not decline to “fully adopt” the rate increase proposed by ASCAP.  She completely rejected any “escalation” of the rate, much like she entirely rejected the substantial rate increases ASCAP attempted to obtain in the recent DMX and MobiTV rate cases.  No amount of spinning can change the fact that ASCAP has now had multiple opportunities to present actual evidence in an unbiased court to back up its frequently press-released claims that the rates for digital music services are too low.  Each and every time, the rate court has found the evidence lacking.

Second, the fact that the ASCAP rate court has recently and consistently rejected multiple attempts by ASCAP to obtain substantial rate increases only proves that the rate court (and consent decree) remain absolutely necessary to prevent ASCAP (and BMI) from abusing the absolute market power they enjoy as an inherent feature of collective and blanket licensing of copyrights.  There has never been (and can never be) a true “free market” in the music licensing space because the rights ASCAP and BMI sell are not in competition with one another.  One cannot operate a legal music service without licenses from both PROs.  Without the consent decree and rate court supervision, ASCAP would have been free to demand rates even higher than the 3% proposal rejected as unreasonably high by Judge Cote, and Pandora would have had no choice whatsoever but to pay it.

More analysis to come after the public version of the decision is released.