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Broadcast Music Sues Pandora Media Over License Fees

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Broadcast Music, a songwriters' rights organization, is suing Pandora Media after the Internet radio company rejected a request to pay a higher license fee for playing songs across various devices, including mobile phones.

In a lawsuit filed with the Manhattan federal court on Thursday, BMI said it had proposed an increase in Pandora's fees "consistent with market rates to reflect the explosive growth of the Internet music streaming marketplace."

BMI collects license fees on behalf of over 600,000 affiliated songwriters, composers and music publishers and distributes them as royalties to those members whose works have been performed.

One of the main challenges facing the decade-old Pandora is the rising cost of licensing music, which grows as more people tune in. The company had about 70.8 million active listeners at the end of May.

(Read More: Here's Why Pandora Shares Rose on Apple's iTunes Radio)

On Tuesday, Pandora said it agreed to purchase KXMZ-FM, a Rapid City, South Dakota-area radio station.

Pandora hopes the radio station deal will allow it to pay lower rates similar to the ones paid by traditional broadcasters such as Clear Channel Communications on their digital services, such as Clear Channel's iHeartRadio.

BMI said in the filing it expects Pandora to claim it is no different from commercial broadcast radio now that it owns a radio station.

(Read More: Damage Control: Pandora CFO Downplays 'iRadio')

BMI currently has agreements with Pandora's rivals Spotify and Music Choice, in which the rates and terms are "the same as, or higher than, BMI's proposal to Pandora," it said in the filing.

BMI did not disclose the proposed license fees in the court filing. It has requested the court to confirm as "reasonable" the rates and terms requested by BMI for using music in the BMI portfolio.

Meanwhile, BMI said it had negotiated an interim license fee to be paid by Pandora starting Jan. 1 until such time the dispute is resolved.

"Disputes regarding the reasonableness of fees between BMI and music users are adjudicated in federal court ... we look forward to the court's oversight of this matter," Pandora spokeswoman Mollie Starr told Reuters.

(Read More: Pandora Shares Jump After Revenue Beat)

The case is in re Broadcast Music Inc vs Pandora Media Inc, Case No. 13-4037, U.S. District Court, Southern District of New York.

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