MLC Sues Pandora To Recover Unpaid Royalties, Late Fees

The Mechanical Licensing Collective (The MLC) sued Pandora for allegedly underpaying and underreporting monthly royalties, including its accounting for the ad-supported “Pandora Free” (also known as “radio” or “free Pandora”).

In a lawsuit filed Monday (February 12) in federal court in Nashville, The MLC seeks to recover royalties allegedly owed to them by Pandora and all related backlogs. MLC is particularly concerned about the “abnormally low per-stream royalties” reported and paid by Pandora starting in 2021, which they say are due to the exclusion of significant “Service Provider Revenue and TCC for Pandora Free.” (Total Content Cost or “TCC” refers to the amount streaming services pay record labels for the right to stream sound recordings. TCC and service provider revenues are necessary to calculate the royalties owed for this general license).

The MLC – which is charged with administering the general engineering license for musical works, created by the Music Modernization Act – also questions Pandora's lack of retroactive rights for 2021 and 2022.

In August 2023, the royalty rate for the license administered by The MLC for the years 2018-2022 was finally set after a five-year battle in which some streaming services fought to pay lower rates for music than originally decided by the copyright committee judges. Pending the rate to be finalized, streamers, including Pandora, paid the previous, lower royalty rate to the music business. Once the final determination was made, it set the rates higher than what streaming services were previously paying. As a result, streamers were ordered to go back and retroactively pay the appropriate 2018-2022 rate for the music.

MLC says it “repeatedly” reminded Pandora to report retroactive adjustments due in 2021 and 2022, and set a deadline of Feb. 9, 2024, which it says Pandora failed to meet. (The MLC did not open its doors until 2021, and therefore retroactive adjustments for 2018-2020 are not within its purview).

Pandora has made “repeated and substantial underpayments of royalties owed,” MLC says in its lawsuit.

The news comes just weeks after the MLC and its counterpart, the Digital Licensee Coordinator (DLC) entered their re-designation process for the first time, a five-year routine review to ensure the effectiveness and efficiency of the two organisations. MLC also made headlines recently for issuing its first review of streaming services. The agency is also controlled by Bridgeport Music, which represents George Clinton and Funkadelic.

Lately, the music industry has been fighting back against what it believes are unfair or unpaid licensing fees. Universal Music Group recently pulled its catalog from TikTok, citing the app's inability to pay “fair value” for music. Last summer, SoundExchange, which collects and distributes performance royalties for digitally broadcast recordings, sued SiriusXM, which owns Pandora, for an alleged $150 million in unpaid royalties, and the National Music Publishers Association (NMPA) sued Twitter for $250 million for “Refusing to pay songwriters and music publishers.”

Representatives for Pandora and The MLC did not respond Billboard request for comment at press time.