BMI Sues Pandora

BMI filed a federal lawsuit against Pandora Media June 13 over the Internet radio company’s attempt to lower its royalty obligations by acquiring a small radio station in South Dakota, thereby qualifying it for the lower rate paid by terristerial broadcasters.

The suit was filed two days after Pandora announced it would buy KXMZ-FM in Rapid City. The company said it believes the move would allow it to pay the same, lower terrestrial rates for streaming services that broadcasters like Clear Channel Communications get for its iHeart Radio.

BMI called Pandora’s acquisition “a stunt” and a “brazen effort to artificially drive down its license fees,” according to the Wall Street Journal. The suit marks the first time BMI has resorted to federal litigation over streaming services.

Terrestrial radio stations pay a lower rate for their digital services, primarily because they pay a much higher rate for over-the-air music broadcasting.  BMI and ASCAP say that Internet radio doesn’t benefit rights-holders the way terrestrial broadcasting does.

Pandora ended its agreement with BMI last year and sought a new license, simultaneously filing its own proceeding with a federal “rate court” in New York to lower the fees it must pay ASCAP.