Pandora has filed a lawsuit against the American Society of Composers, Author and Publishers (ASCAP) in an effort to receive a lower licensing fee to use their music. The world's largest Internet radio service specifically asked a federal court in New York to come up with a reasonable licensing fee that would be good through 2015.
Earlier this year, the ASCAP negotiated a deal with the Radio Music Licensing Committee, a group that represents several broadcasters including Clear Channel. Clear Channel just so happens to operate streaming music service iHeartRadio, one of Pandora's key competitors.
Pandora claims that the ASCAP refused to offer them the same licensing deal that iHeartRadio wound up with. The company also said in its lawsuit that they should be entitled to lower rates given the fact that a number of music publishers have announced plans to withdraw rights to new content from the organization and offer it directly to Internet radio outlets.
One would have to believe this would essentially cut out the middle man and result in more profit for artists and less cost for web radio outfits.
The two parties have been trying to negotiate a new deal for over a year to no avail. In the event that they can't settle things on their own, the District Court in New York has the authority to set a rate they believe is fair for everyone involved.
Either way, Pandora will likely have to do something about their current business model. It's no secret that the company isn't earning a profit. In fact, they're bleeding money at a pretty substantial rate. Pandora lost $25.6 million in the first half of this year compared to just $8.57 million during the same time period in 2011.