Labels claim Pandora owes money for streaming old songs, probably won't get it

Pandora can't catch a break, it seems. Just weeks after the streaming radio service escaped paying higher royalties to songwriters, record companies and musicians have sued it in a New York court for allegedly violating state copyright laws by refusing to pay for older song recordings. The labels argue that Pandora is subject to state rules on compensation whenever it streams tunes recorded before February 15th, 1972, when federal law took over; right now, it's only paying for those newer works. The suing parties claim that Pandora is both depriving artists of income and wielding an "unfair advantage" over on-demand competitors like Rdio and Spotify, which have no choice but to negotiate royalties for classic tracks.

Pandora says it's looking at the claims, and it hasn't provided a formal response so far. However, you shouldn't assume that it will fight the lawsuit tooth and nail -- the legal action may not do as much damage as you'd think.

As Santa Clara University law professor Tyler Ochoa tells us, the labels are likely suing in New York because it's one of the few states with existing case law that addresses royalty issues like this. While some other states have their own relevant copyright rules, the music companies wouldn't have a good precedent to work with in these territories. They would be "starting from scratch" and face a greater chance of losing, Ochoa says. As such, you shouldn't count on seeing a state-by-state litigation campaign. Even a New York victory isn't guaranteed, since the local law doesn't offer perfect clarity on how to handle radio-like internet services.

The record companies may also collect relatively little cash if they do win. As this isn't a federal suit, Pandora might only have to shell out for songs that New York-based customers play. Any retroactive payments would be limited to the past three years, and there would be questions as to why the music outlets didn't push for compensation much sooner. Pandora could theoretically avoid any new royalties by blocking New York customers from streaming pre-1972 songs, although it may not want to risk a backlash from angry listeners.

To Ochoa, these factors make it "pretty likely" that the lawsuit will end in a settlement. There's enough uncertainty that neither side would get much value from duking it out in the courtroom. The odds are that Pandora won't take a serious blow, and that the labels will only have limited success in getting money for their golden oldies.

[Image credit: Dustin Gaffke, Flickr]