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BMI sues Pandora, calling radio station purchase a 'stunt'

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Digital music rights
Digital music rights

A day after Pandora purchased a radio station in an effort to pay artists less in royalty fees, the organization that collects license fees for songwriters and composers filed a lawsuit asking a federal judge to step in. Broadcast Music Inc., better known as BMI, filed suit in the U.S. Southern District Federal Court in New York today accusing Pandora of acting in bad faith as it negotiates new music licenses.

"Pandora's stunt makes a mockery of the performing rights licenses and the rate court process," BMI said in its lawsuit. In a separate statement, the company said it is asking the court to set "reasonable, market-driven fees for Pandora" after direct negotiations with the company failed.

"Pandora's stunt makes a mockery of the performing rights licenses"

Yesterday Pandora said it had acquired KXMZ-FM, a terrestrial radio station in Rapid City, SD, which plays "today's hits without the rap." Terrestrial radio operators who also broadcast online pay lower royalties than online-only companies like Pandora; by acquiring KXMZ, Pandora hoped to qualify for the lower rate.

The move was viewed dimly by music publishers, who accused the company of being "at war with songwriters." It's all part of a lengthy battle between Pandora and music publishers over what should be considered a fair price for online radio. In November the company sued the American Society of Composers, Authors, and Publishers (ASCAP) in an effort to achieve lower rates — it had it failed in an earlier effort to enact licensing changes in Congress. The suit alleges ASCAP has violated the terms of a long-standing antitrust consent decree with the Department of Justice.

In a statement to the Hollywood Reporter, Pandora said music publishers were trying to prop up terrestrial radio stations at the expense of online services. "This is not a case of Pandora trying to pay less," the company said. "It is a case of publishers discriminating against Pandora.” The company attempted to downplay the importance of today's lawsuit. "This process is required by the consent decrees both organizations agreed to after the U.S. Department of Justice sued them for anti-competitive behavior," a Pandora spokeswoman said in a statement to The Verge. "We look forward to the court’s oversight of this matter."