The Mechanical Licensing Collective (MLC), representing songwriters and music publishers in the US, filed a lawsuit against Pandora Media on Monday (February 12), accusing the music streaming service of underpaying royalties owed to rights holders.
The lawsuit, filed in the US District Court for the Middle District of Tennessee in Nashville, alleges that Pandora has been underreporting and underpaying mechanical royalties owed to songwriters and publishers from its “Pandora Free” ad-supported streaming service.
The MLC, established by the Music Modernization Act of 2018, serves as the sole entity authorized to collect and distribute these “mechanical royalties” due for the reproduction and distribution of musical works.
The lawsuit (which you can read here) claims Pandora misrepresented its streaming activity and failed to report royalties for a portion of streams on the “Pandora Free” service.
Furthermore, the MLC accuses Pandora of failing to correct the full underpayment as part of its payment of retroactive royalties for 2021 and 2022, despite reminders and a now-missed deadline. The final mechanical royalty rates for these years were determined in August 2023, requiring retroactive adjustments from streaming services like Pandora.
“Our team repeatedly sought to resolve this issue directly with Pandora, but Pandora has refused to correct their reporting or royalty payments,” said the MLC’s CEO, Kris Ahrend.
“Our team repeatedly sought to resolve this issue directly with Pandora, but Pandora has refused to correct their reporting or royalty payments.”
Kris Ahrend, The mLC
“The MLC has worked closely and tirelessly with blanket licensees to ensure their compliance with the compulsory license terms… The MLC is the only entity that has the statutory authority under the Music Modernization Act to take legal steps to enforce the obligations of streaming services. We have brought this action to ensure that our Members receive all the mechanical royalties they are due in connection with the use of their songs by Pandora on the Pandora Free service,” Ahrend added.
The MLC’s lawsuit seeks accurate reporting of song usage, unpaid royalties and late fees dating back to January 1, 2021, along with an order requiring future compliance.
The lawsuit coincides with the MLC’s first-ever re-designation process, under which the US Copyright Office initiated five-year review of the MLC and the Digital Licensee Coordinator (DLC).
It also follows the MLC’s recent plans to audit streaming services to ensure the accuracy of their reported and paid royalties. In January, The MLC issued notices of intent to conduct audits of Digital Service Providers (DSPs) including Pandora Media and other platforms that started operating under the compulsory blanket license administered by the MLC in 2021.
“We have brought this action to ensure that our Members receive all the mechanical royalties they are due in connection with the use of their songs by Pandora on the Pandora Free service.”
Kris Ahrend, The mLC
“Ensuring DSPs have reported royalties accurately is one of The MLC’s statutory responsibilities under the MMA,” Ahrend said last month. “The MLC has tapped music industry audit veteran, Jane Bushmaker, a member of The MLC’s Analytics & Automation team, to oversee DSP audits, which will be conducted by experienced outside audit firms.”
With the ‘License Availability Date’ set on January 1, 2021, the MLC expected to start receiving blanket license royalty payments in February 2021 from the DSPs. However, in its lawsuit, the MLC said “Pandora has to date failed and refused to report and pay monthly royalties in full to the MLC for at least one of these offerings, namely the ad-supported offering that it calls Pandora Free (or Free Pandora).”
In February 2021, the MLC reported receiving a total of $424.38 million in historical unmatched royalties, as required in order for them to seek the MMA’s limit on liability for past infringement. Apple contributed $163.3 million, Spotify $152.2 million, and Amazon and Google contributed $42.7 million and $32.8 million, respectively.
In October 2023, the MLC said it has distributed more than $1.5 billion in royalties since it was founded.
Music Business Worldwide