Mechanical Licensing Collective Sues Pandora for Years of Unpaid Statutory Royalties

The Music Modernization Act (MMA), which took effect in October 2018, was enacted primarily to centralize musical copyright ownership by creating “blanket licenses” for certain songs. In 2021, the MMA established a nonprofit organization, the Mechanical Licensing Collective (MLC), to administer those licenses and distribute the royalties. (See our three-part insight about the MMA for more details.) Unfortunately, there have been some high-profile instances of noncompliance.

On February 12, 2024, the MLC sued Pandora to recover royalties under the compulsory mechanical license that Pandora obtained under the MMA. Digital music providers like Pandora that obtain a blanket license are permitted to reproduce and distribute copyrighted songs for “Covered Activity,” defined in the MMA as “the activity of making a digital phonorecord delivery of a music work, including in the form of a permanent download, limited download, or interactive stream, where such activity qualifies for a compulsory license.” 17 U.S.C. § 115(e)(7). According to the complaint, Pandora has failed to report and pay monthly royalties in full since 2021 to the MLC for Pandora’s streaming offerings, particularly Pandora’s ad-supported offering known as Pandora Free, a Covered Activity which allows users to search for and play music “on-demand for free.”

The MLC first noticed discrepancies when comparing the high number of streams reported by Pandora to the low amount of Service Provider Revenue or Total Content Cost (“TCC”) in connection with Pandora Free. The MLC filed suit in the United States District Court for the Middle District of Tennessee Nashville Division to recover the unpaid statutory license royalties, late fees and MLC’s costs and attorneys’ fees, as well as for a court order to enforce future compliance with the MMA. Pandora seems to have a track record of not paying their licensing fees, and we will be following how Pandora justifies their immunity from these mechanical license payments.