[A version of this post first appeared in the MusicTechPolicy Monthly]
On June 7, Pandora sent out to independent publishers a new mechanical license that was billed as a license for the on-demand streaming service under the subject line: “Pandora License Offer: Log into your Music Reports Account to Opt-In!”
Let’s set aside the anecdotal reports to MTP that no one so far who received the email actually has an account with MRI, that the email link brought users to an MRI account creation page and that it’s unclear how Pandora obtained the email addresses of publishers who did not have MRI accounts. (Also known as at least potential spam.)
While the new Pandora license had one feature that was good for songwriters (dropping the absurd requirement that Pandora clings to at the Copyright Royalty Board that anyone auditing Pandora has to have a CPA licensed in the jurisdiction where the audit occurs–helllooo Fargo)–the license has some features that are NOT good for songwriters or publishers.
This is mostly due to the way the license is crafted. It applies both to the on-demand service that Pandora intends to launch based on its purchase of Rdio’s assets AND to Pandora’s existing noninteractive service. This has special implications for the PROs.
But the most egregious clause in the license applies to on-demand streaming mechanicals and seems designed to head off any songwriter lawsuits such as those brought against Spotify by David Lowery and Melissa Ferrick. It has already come to be called the “Lowery Clause”.
The Lowry Clause in Pandora’s supposedly transparent license allows Pandora to use your songs, run their new service and not account to you or pay you and the only thing you can do about it is figure it out later. But only after you “discuss” the nonpayment and work for free for Pandora to figure out how to fix their systems.
Decide for yourself what the purpose of the Lowery Clause might be (par 6(a)(v)), with language that will be the source of litigation or defenses to litigation highlighted:
Pro-Rata Share Discrepancies [Deceptive tilting, is this also the 100% share unmatched?]: Solely with respect to the Limited Interactive Service and/or the On-Demand Service, in the event PUBLISHER believes, in its reasonable business judgment, that Pandora has failed to adequately identify sound recordings [why sound recordings, this is for songs] and/or the Compositions embodied therein, and/or the owners or administrators thereof, such that the royalty calculations do not adequately account [they either do or they don’t] for PUBLISHER’s true pro rata share of the Compositions streamed or downloaded on the Limited Interactive Service and/or the On-Demand Service (i.e., a significant number of PUBLISHER Compositions have gone[how about are going] unidentified or “unmatched”), then the Parties shall engage in good faith discussions regarding a revised methodology for the calculation of PUBLISHER’s pro rata share for the Limited Interactive Service and the On-Demand Service [what about Pandora radio]. [How about payment instead of revised methodology] For avoidance of doubt, any such revised methodology agreed to by the Parties will be applied solely on a prospective basis, provided, however, that in the event there are any so-called “unmatched,” “pending” and/or “black box” monies for the past that are being held by Pandora, the Parties may discuss applying any revised methodology agreed hereunder to such past amounts. [Notice the switch from “shall” to “may” which means Pandora may elect to not have those discussions to fix the past]
This clause is essentially an insurance policy for Pandora to run up a black box a la Spotify, but never have to do anything about it other than “discuss” a “revised methodology” to fix the problem going forward–or not.This sounds like Pandora is planning to have a black box and plans to use unlicensed songs.
How is this “transparent”? How is this not just more of the same from Pandora that is hell bent on screwing songwriters.