**Pandora Accused of Underpaying Mechanical Royalties in Lawsuit**
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The Mechanical Licensing Collective (MLC) has filed a lawsuit against US streaming service Pandora, alleging that the company has underpaid royalties for the usage of sound recordings on its free-tier. According to the MLC, Pandora’s free users have the ability to listen to particular sound recordings on-demand, which requires the payment of mechanical royalties. The MLC’s CEO, Kris Ahrend, has stated that their team attempted to resolve the issue directly with Pandora, but the company has refused to correct its reporting or royalty payments.
**Defining Personalized Radio and Mechanical Rights**
The dispute between the MLC and Pandora centers on the definition of ‘personalized radio’ services and whether they exploit the mechanical rights in songs, as well as performing rights. Traditionally, radio broadcasters only needed a license covering performing rights because DJs would play music from records or CDs, which would then be transmitted over the airwaves. However, the rise of online and personalized radio services has complicated the licensing landscape, with different rules applying in different countries.
**Interactive vs. Non-Interactive Services**
In the US, the MLC administers the mechanical rights compulsory license, which distinguishes between interactive and non-interactive online services. Interactive services are considered to exploit the mechanical rights and require royalty payments. Pandora’s Premium subscription plans, which allow users to skip and replay songs on-demand without limits, pay out to the MLC. However, the dispute arises in the case of Pandora Free, the ad-supported service, where users have a limited number of skips per day and may be prompted to engage with advertisements to unlock more skips.
**Pandora’s Free Service and Royalty Payments**
The MLC alleges that Pandora’s free service is an interactive service because users can select and receive streams of particular sound recordings on-demand at any time. While Pandora acknowledges that certain functionalities of its free-tier service are interactive, it contends that the majority of the service is non-interactive. As a result, it does not report all its free-tier revenues to the MLC for royalty calculation.
**The Lawsuit and Pandora’s Response**
The MLC’s lawsuit argues that Pandora has excluded revenue from non-interactive services on the Pandora Free configuration, believing that these elements are beyond the scope of the compulsory license. Pandora has disputed the MLC’s interpretation of US copyright law and the compulsory license, asserting that it is not the job of the MLC to decide whether a service is required to pay mechanical royalties.
**Conclusion**
The MLC has brought this action to ensure that its members receive all the mechanical royalties they are due in connection with the use of their songs by Pandora on the Pandora Free service. The lawsuit brings to light the challenges in defining and determining royalty payments in the ever-evolving landscape of digital music streaming.
By addressing these issues, the MLC aims to protect the rights of songwriters and ensure fair compensation for the use of their music on streaming platforms. The outcome of this lawsuit could have significant implications for the way mechanical royalties are handled in the music industry, particularly in the context of free-tier streaming services.