Muhammad Ibadurrohman
The legal battle between the streaming service Pandora and the Mechanical Licensing Collective (MLC) has taken an unexpected procedural turn that could reshape how digital music platforms are classified for royalty purposes. In a ruling issued on September 30, federal judge Eli Richardson of the U.S. District Court for the Middle District of Tennessee declined to resolve the case via summary judgment, despite requests from both parties to do so. Citing the sheer magnitude of the evidence—a “corpulent” collection of over 7,000 pages of documentation and 263 distinct exhibits—Judge Richardson determined that the complexity of the factual record is too great for a bench ruling, opting instead to leave the final decision to a jury.
This litigation, which began in 2024, represents one of the most significant tests of the Music Modernization Act (MMA), the landmark 2018 legislation that overhauled how songwriters and music publishers are compensated in the streaming age. At the heart of the dispute is a fundamental question of platform classification: whether Pandora’s "free tier" functions as a non-interactive radio-style service or as an interactive, on-demand streaming service. The distinction carries massive financial implications, as the mechanical royalty rates for interactive services are significantly higher than those for non-interactive radio broadcasts.
The Core of the Legal Dispute
The Mechanical Licensing Collective was established by Congress to administer the blanket mechanical license for digital service providers (DSPs). Its mandate is to ensure that songwriters and publishers receive the royalties they are owed from streaming. The MLC’s 2024 lawsuit alleges that Pandora has been intentionally misclassifying its free-tier product to avoid paying the higher statutory rates required of interactive platforms like Spotify or Apple Music.
While Pandora has historically operated under the "non-interactive" banner—a model characterized by algorithmically curated stations where users have limited control over song selection—the MLC argues that the introduction of features like "Sponsored Premium Access" has effectively moved the platform into the interactive category. These sessions allow users to unlock on-demand playback of specific songs by engaging with advertisements. The MLC contends that this functionality transforms the user experience from passive listening to an active, interactive choice, thereby triggering the obligation to pay higher royalties.
Pandora, a division of SiriusXM, has vehemently denied these allegations. In its filings, the company characterized the MLC’s legal action as an overreach, arguing that the collective is misinterpreting the technical nature of its service and abusing its regulatory power. Pandora maintains that its core product remains fundamentally radio-like, and that the minor inclusion of ad-supported, on-demand features does not fundamentally alter the nature of the service under current copyright law.
Judicial Reasoning: Why a Jury?
Judge Richardson’s decision to bypass summary judgment is a rare procedural move in high-stakes intellectual property litigation. Typically, federal judges attempt to resolve such cases by reviewing the discovery record to determine if any "genuine issues of material fact" exist. If the judge believes the evidence points clearly to one side, they grant summary judgment.
In this instance, Judge Richardson expressed skepticism regarding the clarity of the record. He noted that the necessity of sifting through thousands of pages of technical documentation to determine the classification of a streaming service suggests a deep, unresolved conflict. "If a summary judgment motion requires so many different pillars of support, there naturally is an increased mathematical likelihood that one of the essential pillars is unsteady," Richardson wrote in his order. He further stated that if a party needs such a massive volume of evidence to prove there is "nothing to see here," the volume itself suggests that a jury should be the one to interpret the nuances of the service’s functionality.
A Chronology of Conflict
The tension between the MLC and digital platforms has been building since the organization’s inception. The following timeline outlines the progression of the current dispute:
- 2018: The Music Modernization Act is signed into law, creating the MLC to streamline the payment of mechanical royalties.
- 2023-2024: The MLC intensifies its audit and enforcement activities, scrutinizing how streaming services categorize their various subscription and ad-supported tiers.
- Early 2024: The MLC officially files its lawsuit against Pandora, alleging that the service underpaid songwriters for years by misclassifying its free tier.
- Mid-2024: Both Pandora and the MLC file motions for summary judgment, asking the court to resolve the matter without a trial.
- September 30, 2024: Judge Eli Richardson issues an order denying the motions for summary judgment, citing the overwhelming volume of evidence and the need for a jury to evaluate the facts.
Broader Implications for the Music Industry
This case is being watched closely by the entire music industry, as it touches upon the ongoing debate regarding "bundling" and "tiering" of music services. The outcome could potentially set a precedent for how other streaming giants handle their own hybrid models.
The industry is currently in a state of flux regarding royalty enforcement. In a separate, high-profile case, the performance rights organization SoundExchange attempted to sue SiriusXM over royalty calculations related to bundled subscriptions. That lawsuit was dismissed by a judge who ruled that SoundExchange lacked the statutory authority to bring such claims—a decision that is currently under appeal. The Pandora case, however, is distinct because the MLC is specifically empowered by Congress to collect and enforce mechanical royalties, giving the collective a stronger legal standing than SoundExchange had in its failed attempt.
Furthermore, the MLC has been active on multiple fronts. In 2024, it also sued Spotify, alleging that the platform’s bundling of audiobooks with music subscriptions was a tactic to circumvent the full payment of mechanical royalties. While the primary claims in the Spotify suit were dismissed by a court, the underlying tension regarding how "value" is assigned to music in a bundle remains a critical point of contention in ongoing Copyright Royalty Board proceedings, such as the Phono V rate-setting process.
Responses and Future Outlook
In the wake of Judge Richardson’s order, both sides have publicly maintained their confidence. A spokesperson for Pandora emphasized that the judge’s ruling was purely procedural and did not reflect a decision on the merits of the case. "Pandora is committed to compensating songwriters and publishers in accordance with the law, and we remain confident in our position," the company stated.
Conversely, the MLC welcomed the ruling as a validation of its ongoing efforts. "The MLC will continue to pursue this action to enforce Pandora’s royalty payment obligations under the statutory license, supported by the substantial evidence that the MLC has compiled," a representative said. The collective views the jury trial as an opportunity to present the "substantial evidence" it has gathered regarding the interactive nature of Pandora’s service.
As of now, no trial date has been set. This leave-time opens a window for potential settlement negotiations. Given the high cost of litigation and the potential for a precedent-setting jury verdict that could force a fundamental restructuring of Pandora’s business model, both parties may find a negotiated agreement more palatable than the uncertainty of a jury trial.
If the case does proceed to trial, the outcome will likely hinge on technical testimony regarding the user experience and how "interactivity" is defined under the complex framework of the MMA. For songwriters and publishers, the case represents a critical attempt to ensure that innovation in digital distribution does not come at the expense of fair compensation. For streaming platforms, it serves as a warning that the "radio" versus "on-demand" dichotomy is no longer a simple legal distinction, but a contested space where every feature is subject to rigorous regulatory and legal scrutiny.
The resolution of this case will undoubtedly influence future royalty negotiations and potentially force platforms to adjust their feature sets to avoid triggering higher payment tiers. Until a verdict is reached or a settlement is announced, the industry remains in a state of watchful waiting, as the fundamental question of what constitutes "interactive" music streaming remains the focal point of the digital music economy.
