Streaming radio service Pandora is being sued by a number of high profile music labels accusing it of failing to pay royalties for the use of recordings made before 1972.
While US copyright law only covers recordings made after 1972, some state laws, including New York’s where the lawsuit has been filed, do offer copyright protection for older material.
The labels bringing the lawsuit – Sony Music Entertainment, Warner Music Group, ABKCO Music & Records, Capitol Records, and UMG Recordings – said in the filing the content at the center of the case includes “some of the most iconic music in the world”, Reuters reported Thursday.
The plaintiffs called on Pandora to end what it described as “massive and continuing unauthorized commercial exploitation” of these older music tracks, which include songs by the likes of the Beatles, the Rolling Stones, Marvin Gaye, and Fleetwood Mac.
It added that the Internet radio service’s “refusal” to pay royalties for use of the material was “fundamentally unfair.”
Commenting on the case to Digital Trends, Pandora’s Mollie Starr said on Thursday the company is “confident in its legal position and looks forward to a quick resolution of the matter.”
However, in a regulatory filing back in February, Pandora acknowledged that if it is found to have violated the copyright of pre-1972 material, the penalty could be “significant,” adding that if it is ordered to obtain licenses, the costs involved “could harm our business and operating results.”
Spiraling costs
The music streaming service, which has around 250 million (mostly US-based) registered users, currently pays out around half its revenue in royalty payments to music labels and artists. In an effort to cover its spiraling costs, the service announced recently that from next month its Pandora One monthly subscription plan will rise by a dollar to $4.99. On top of that, it’ll be ending the annual subscription option that allowed for a discounted rate of $36 per year.
“The costs of delivering this service have grown considerably,” a spokesperson for the company said at the time. “For example, the royalty rates Pandora pays to performers via SoundExchange for subscription listening have increased 53 percent in the last five years and will increase another 9 percent in 2015.”
Since launching in 2005, the service has grown to become the dominant player in music streaming in the US, with 31 percent of the market. To give that figure some context, iHeartRadio comes in behind Pandora with a mere 9 percent share, with Apple’s recently launched iTunes Radio in third spot with 8 percent of the market.
