Pandora Media Inc. and the American Society of Composers, Authors and Publishers are expected to square off Tuesday in a long-awaited federal-court trial to determine how much the Internet-radio giant should pay for the use of their compositions for the next two years.
According to wsj.com, the outcome could have a broad effect on the growing digital-music business, which now pays more to record labels and performers than to those who write and publish songs.
Pandora pays a total of 4.3% of its revenue to publishers and songwriters represented by ASCAP and other organizations that collect royalties on their behalf. By contrast, the Oakland, Calif., company pays record labels and performers roughly half of its revenue.
Pandora sued ASCAP more than a year ago seeking to pay writers and publishers less. The company argues that it shouldn't have to pay ASCAP's songwriters and publishers any more than terrestrial radio broadcasters do—currently about 1.7% of their revenue—since Pandora, which generates the bulk of its revenue from advertising, considers local radio stations its closest competitors.
Historically radio stations weren't required to pay record companies for the use of their recordings, on the theory that airplay promoted sales. As sales have declined in recent years, labels have sought to begin collecting royalties of their own for airplay, with limited success.
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