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The MLC and Pandora Battle Over the Definition of an “Interactive Service”

Emma AistropNews & Insights

Does Pandora’s free ad-supported streaming service (“Pandora Free”) offer its users interactive streams? In a lawsuit filed on February 12, 2024, the Mechanical Licensing Collective (“The MLC”) asserts that Pandora Free falls under the statutory definition of an interactive service, and seeks to recover unpaid blanket license royalties and late fees on this basis.[1] An “interactive service” is statutorily defined as one that allows a recipient to receive a personalized transmission of a program, or request and select a particular sound recording.[2] More specifically, an interactive service offers its users “on-demand functionality.”[3] However, not every stream must be chosen by the user for a service to be considered “interactive.”[4] For example, many interactive services offer a ‘lean back’ option where the user can listen to pre-made playlists or customized webcasts.[5] Accordingly, because Pandora Free widely publicizes the ability for users to “play and search what [they] want,” The MLC contends that this “on-demand feature” is covered by Pandora’s blanket license and requires Pandora to pay mechanical royalties for all streaming activity on this service.[6]  

The MLC is responsible for administering blanket licenses for musical works, as delegated to the organization by the Register of Copyrights.[7] These compulsory blanket licenses, created by the Music Modernization Act (“MMA”) of 2018, are granted to services that provide on-demand access to music.[8] The MLC is also tasked with collecting and distributing “mechanical royalties” due to songwriters, composers, lyricists, and music publishers.[9] Although Pandora argues that it exceeds the scope of the MLC’s role to offer “statements of the law,” the MLC reasons that it is authorized to enforce royalty obligations of blanket licenses and to ensure licensees correctly pay all associated royalties.[10]  

Royalty rates are set by the Copyright Royalty Board and the rates for the first two years of the blanket license were finalized in August 2023.[11] While these rates were being negotiated, the MLC operated using rates that were to be retroactively adjusted once final rates were determined.[12] The MLC says, “the deadline for adjusted reporting at the final rates and terms was February 9, 2024”.[13] Therefore, The MLC argues that Pandora failed to cure its improper reporting by failing to identify all usage under its blanket license.[14]

Statutorily defined percentages of “Service Provider Revenue” and of “Total Content Cost” (“TCC” ) are used to calculate the royalties due for a blanket license.[15] Specifically, TCC is defined as the payment from streaming services to record labels to secure the right to stream sound recordings.[16] The MLC suspects Pandora Free’s Service Provider Revenue and TCC is low in comparison to its high number of streams, and that these values have been improperly reported.[17] Consequently, The MLC asserts that Pandora has underpaid its royalties due under its blanket license for the years 2021 and 2022.[18]

Conversely, Pandora contends only a portion of its ad-supported service is interactive and thus reported its activity accordingly.[19] The MLC rebuts this argument citing a previous admission by Pandora’s Chief Product Officer (“CPO”) that on-demand functionality was added to Pandora Free as an attempt to reduce its user attrition and compete against similar services.[20] Likewise, the CPO stated that a Pandora Free user can now watch a video advertisement to earn replays, instead of “jumping to” Spotify’s ad-supporter tier.[21] However, Spotify is an interactive service and pays royalties on its entire free tier.[22]

This lawsuit between The MLC and Pandora is part of a larger trend within the music industry where rights holders negotiate the compensation received for the use and exploitation of their musical works. Recently, Universal Music Group (UMG) wrote an open letter that shared its goals following the breakdown of its negotiations with TikTok.[23] In the letter, UMG demanded the removal of its catalog from the TikTok platform when TikTok “proposed paying [its] artist and songwriters at a rate that is a fraction of the rate that similarly situated major social platforms pay”.[24] As digital streaming and social media platforms continue to commercialize music, will the owners of these platforms bridge the value gap with music rights holders seeking fair compensation, or will these platforms be forced to change their business models?


[1] Complaint at 1, Mechanical Licensing Collective v. Pandora Media, LLC, No. 324-MC-09999 (M.D. Tenn., Feb. 12, 2024).

[2] 17 U.S.C § 114(j)(7)

[3] MLC, supra note 1 at 6.

[4] MLC, supra note 1 at 7.

[5] Chris Cook, MLC Sues Pandora Over Unpaid Royalties, CMU (Feb. 13, 2024), https://completemusicupdate.com/mlc-sues-pandora-over-unpaid-royalties.

[6] MLC, supra note 1 at 10.

[7] MLC, supra note 1 at 2.

[8]  MLC, supra note 1 at 1.

[9] Mandy Dalugdug, The MLC Sues Pandora For Allegedly Underpaying Royalties and Late Fees, Music Business Worldwide (Feb. 13, 2024), https://www.musicbusinessworldwide.com/the-mlc-sues-pandora-for-underpaying-royalties-and-late-fees.

[10] MLC, supra note 1 at 15.

[11] MLC, supra note 1 at 8.

[12] MLC, supra note 1 at 16.

[13] MLC, supra note 1 at 17.

[14] MLC, supra note 1 at 16.

[15] Kristin Robinson, The MLC Sues Pandora to Recover Unpaid Royalties, Late Fees, Billboard (Feb. 12, 2024), https://www.billboard.com/business/publishing/pandora-sued-mlc-unpaid-songwriter-royalties-late-fees-1235606144.

[16] Id.

[17] MLC, supra note 1 at 13.

[18] MLC, supra note 1 at 17.

[19] Cook, supra note 5.

[20] MLC, supra note 1 at 12.

[21] Id.

[22] Cook, supra note 5.

[23] An Open Letter To the Artist and Songwriter Community – Why We Must Call Time Out on TikTok,Universal Music Group, https://www.universalmusic.com/an-open-letter-to-the-artist-and-songwriter-community-why-we-must-call-time-out-on-tiktok/ (last visited Mar. 18, 2024).

[24] Emma Roth, TikTok is Removing Even More Music, The Verge (Feb. 28, 2024) https://www.theverge.com/2024/2/28/24085988/tiktok-umg-music-removal-all-artists; UMG, supra note 23.