A lawsuit filed against US streaming service Pandora by the MLC is “a wild overreach” of the US mechanical rights collecting society’s remit. Or so says Pandora, in its response to that lawsuit. As well as disputing the claims made against it - the MLC “apparently thinks it knows better than the entire music publishing industry”, it says - Pandora reckons that the society, paid for by the digital platforms, isn’t meant to use its funding to “pursue legal frolics and detours”.
Expanding on that theme, Pandora argues that the MLC - which was created by the 2018 US Music Modernization Act - is not “authorised to play judge and jury over a streaming service’s legal compliance”, nor can it “insist that Pandora fundamentally change its approach to licensing an entire tier of its service solely because the MLC has taken upon itself to press a legally incoherent position at odds with the view of the rest of the music industry”. With that in mind, it adds, the court should dismiss the MLC’s lawsuit.
This dispute centres on what licences Pandora requires when it comes to the songs that its users stream. With on-demand streaming, like Spotify, it is agreed that services exploit both the performing rights and the mechanical rights of songs. In some countries, these different elements of the song copyright are licensed separately. In the US, collecting societies like BMI and ASCAP license the performing rights, while the MLC administers the compulsory licence that covers mechanical rights.
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Pandora offers an on-demand streaming service which is licensed in that way. However, the core Pandora product - Pandora Free - is an ad-funded personalised radio service which doesn’t allow users to pick tracks on-demand except in certain circumstances. Under the US system that is classified as ‘non-interactive’ and it has generally been agreed that, in that scenario, only a performing rights licence is required.
Users of the free personalised radio service can access 30 minutes of on-demand music in return for watching an advert via a promotion called Sponsored Premium Access. And Pandora accepts that, when a user does that, for 30 minutes they are using an interactive service during which time mechanical rights are being exploited.
However, the MLC argues that the availability of Sponsored Premium Access means the entire personalised radio service should be classified as interactive, and therefore mechanical rights are in play. That would require Pandora to pay mechanical royalties to the MLC for all usage of the personalised radio service, and not just when a user opts into Sponsored Premium Access.
Justifying that position in a lawsuit filed in February, the MLC stated, “Users of Pandora Free can select and receive streams of particular sound recordings on-demand at any time. Even if a Pandora Free user decides to listen to music in a ‘lean back’ mode such as a playlist or custom-made webcast, they remain able to listen to particular sound recordings on-demand whenever they choose”.
In its response, Pandora argues that the MLC is misrepresenting the law and going against years of music industry convention. “For over six years Pandora has offered its users of free internet radio service the ability to access Sponsored Premium Access sessions. At no point during that time has anyone else in the music publishing or recorded music industry alleged that the limited availability of SPA sessions to Pandora’s free-tier users turns the entirety of that tier into an interactive service like Spotify or Apple Music”.
The viewpoint of the record industry is relevant here - even though the MLC collects royalties for songwriters and music publishers - because on the recordings side Pandora can rely on another compulsory licence, administered by SoundExchange, for its personalised radio service but not its on-demand service.
And, it argues, no one has said the personalised radio service no longer qualifies for the SoundExchange licence because of Sponsored Premium Access. Which means the record industry still considers the personalised radio service to be first and foremost non-interactive.
Returning to whether or not the MLC should even have a formal opinion on any of this, Pandora’s new filing adds, “The MLC is intended to be a neutral arbiter; it is funded solely and entirely by the digital music platforms to cover the ‘reasonable costs’ associated with fulfilling the MLC’s licensing and royalty distribution duties. The MLC is not authorised to opine on whether particular transmissions offered by Pandora are properly characterised as interactive or non-interactive as a legal matter”.