Direct Licenses Can Be Benchmarks in Rate-setting Cases, Copyright Office Rules
The Copyright Office handed Pandora a procedural victory late Friday in the Internet service's quest to have the Copyright Royalty Board (CRB) consider its past deals with independent music label rights consortium Merlin and independent label Naxos as possible benchmarks for CRB’s 2016-2020 webcasting rate-setting proceeding. The 2009 Webcaster Settlement Act (WSA) doesn’t prohibit the admissibility of direct licenses like Pandora’s Merlin/Naxos deals that are clearly influenced by WSA terms, Register of Copyrights Maria Pallante said in the ruling. Copyright royalty judges are normally barred from considering alternative rate structures authorized by WSA in rate-setting proceedings since they aren’t set by CRJs, but direct licenses don’t fall under that prohibition, Pallante said.
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Pandora touted the ruling Monday as a “preliminary” win in the webcasting proceeding that “affirmed the admissibility of Pandora's agreement with Merlin as a valid benchmark,” though the CRB isn’t set to issue the 2016-2020 rates and terms until December. “We look forward to the certainty that December's decision will bring, and are prepared to thrive in a number of potential outcomes,” a Pandora spokesman said in a news release. SoundExchange disputed Pandora’s argument for considering the direct licenses in rate-setting proceedings, while iHeartMedia and the NAB took positions supporting Pandora. SoundExchange didn’t immediately comment.
The New York Stock Exchange briefly suspended trading of Pandora stock twice Monday after the stock’s price rapidly spiked after news of Pallante’s ruling began to circulate. Pandora shares ended trading at $20.79, up more than 5.5 percent.
Pandora is “vastly” overstating the importance of Pallante’s ruling by saying its proposed Merlin/Naxos benchmarks are valid, music industry attorney Chris Castle said. “[The] Register merely concluded that the WSA didn’t prohibit the admissibility of direct licenses,” he said. “The degree to which the direct license benefits Pandora will probably turn on the CRB’s assessment of their respective probative value.” Pallante ruled that CRB “should consider the overall context of the statutory license and the WSA when assessing” the probative value of any direct licenses, but she didn’t rule on the value of the Merlin/Naxos deals, Castle said.
Pallante’s ruling doesn’t guarantee that the CRB won’t come to its “own conclusion” on how much weight to give to direct licenses, Public Knowledge policy counsel Raza Panjwani said. “Any time someone tries to use outside rates to influence a proceeding, it’s interesting to see what those rates mean,” PK Vice President-Legal Affairs Sherwin Siy said. “They can be limited by what the status of the market is.” The Merlin/Naxos deals have been criticized for being far lower than the average, but they also involve sizable players, Panjwani said. “Merlin is not a nobody,” he said.