Justice Department to review music licensing rules; Pandora responds

Following a long battle between music rights-holders and Internet radio giant Pandora Media Inc. over songwriter royalties, the U.S. Department of Justice is stepping in.

The department said it has opened a review of its consent decrees governing music licensing groups that collect royalties from the use of their members’ songs and compositions on radio, television and Internet services -- rules that have been in place since the days of Glenn Miller, Jimmy Dorsey and Billie Holiday.

Licensing groups ASCAP and BMI, also known as performing rights organizations, and publishers including Sony/ATV and Universal Music Publishing Group argue that the consent decrees entered in 1941 are out of date in the era of streaming music.

The publishers, songwriters and rights organizations have long fought for higher royalty rates for uses of their songs and compositions on Internet services such as Pandora. They have said the consent decrees undermine their position.

“The Department understands that ASCAP, BMI and some other firms in the music industry believe that the Consent Decrees need to be modified to account for changes in how music is delivered to and experienced by listeners,� the department said.

The consent decrees do not cover music performers, whom Pandora pays separately.

The review by the department follows a series of lawsuits between Pandora and the songwriter organizations.

Pandora, based in Oakland, sued ASCAP in 2012 to lower the fees it pays to play songs on its service that now counts 77 million active users. Last year, BMI asked the federal rate court to set royalty fees after Pandora allegedly rejected a “reasonable� rate BMI said it had proposed.

Pandora said on Wednesday that the disputed consent decrees provide important protections for consumers and songwriters by providing a way to establish a fair royalty rate and help foster innovation by new industry players.

“Any review of the consent decrees must take into account the careful balance of how to best serve songwriters while also fostering competition and innovation to the benefit of consumers,� said Dave Grimaldi, Pandora’s director of public affairs, in a statement.

The consent decrees have been reviewed periodically since 1941, with ASCAP’s agreement last amended in 2001 and BMI’s last changed in 1994.

ASCAP president and chairman Paul Williams cheered the department’s review, saying its agreement hasn’t been modified since the introduction of the iPod.

“New technologies have dramatically transformed the way people listen to music,� Williams said in a statement. “The system for determining how songwriters and composers are compensated has not kept pace, making it increasingly difficult for music creators to earn a living.�

As part of the review, the Justice Department has invited comment from parties, including songwriters, composers, publishers, licensees and service providers, until Aug. 6.