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Pandora In Court Fighting Direct Deals; Signs Direct Deal with Universal

For those following the increasingly long and complex saga of what publishing rates Pandora pays, the story has just become longer and more complex.

Pandora Fighting Direct Deals

Here’s the gist of it: Pandora has just reached a deal with Universal Music Publishing Group (UMPG) that is reported to represent the highest publishing rates the internet radio service has ever paid. But the surprise here is that while it has cut this deal, Pandora is awaiting to hear a ruling on a motion it filed in the ASCAP rate court that argues that publishers aren’t allowed to make direct deals because they are operating under ASCAP consent decree, according to Billboard .

This means that when the ruling comes down, publishers must accept that rate instead of any direct deals, meaning essentially that the motion Pandora filed would override the deal reached between Pandora and UMPG.

What This Really Means

While all of this sounds convoluted, if not downright counterintuitive, it’s because of the increasingly complex publishing rates in the digital music sphere. Both companies have remained relatively quiet on the matter other than confirming the deal was made.

"We can confirm that UMPG has worked out an arrangement with Pandora that we believe is in the best interest of our writers while ensuring Pandora access to our music through the end of the year,” said UMPG in a statement. Pandora was even less forthcoming.

"We believe all parties are awaiting the ruling of the court on our motions,” the company said, further indicating they are waiting on the court ruling.

Pandora negotiated the deal essentially as a grace period until that ruling comes, because otherwise it would have risked copyright infringement any time it played music belonging to Universal starting July 1, as the music label withdrew their digital rights at that time. The court ruling is expected to come at the end of July, which should set the rates through the end of 2015.

It is unclear what (if any) deals Pandora has made with other major publishers, which include BMG Chrysalis and Warner/Chapell Music, both of which also filed notices that they would withdraw their digital rights from ASCAP on July 1 (though it is reported that Warner/Chapell decided to delay its withdrawal until January 1, 2014.

What The Deal Means for the Music Industry

While the deals and legal measures at play here are very complex and still being determined, the real issue is much larger than a single deal by Pandora and UMPG. Unlike subscription, on-demand streaming services like Spotify and Rhapsody -- which do operate under direct deals with the record labels -- Pandora operates under compulsory licenses. These are rates that are predetermined by the Copyright Board rather than being negotiated with the labels.

These rates will be under review by Congress in the near future, but in the meantime are being challenged by labels as being unfair to both labels and artists. The future rulings will affect not only how Pandora continues to operate (and how much it pays to artists and songwriters), but also how future internet radio services will be able to operate.

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