Internet radio company Pandora Media Inc. (P) is currently tangled in a licensing dispute with Broadcast Music Inc. (BMI), a songwriters group, in trying to gain access to the works excluded from the group’s recent media offerings.
Pandora suffered a setback when U.S. District Judge Louis L. Stanton rejected Pandora’s request to honor its license for all of BMI’s work in spite of the publishers’ efforts to modify their contracts to exclude Internet streaming.
The District Judge ruled that publishers can use their discretion to license or not to license the performance of their compositions and that copyright holders such as BMI have the right to withdraw their composition from Internet streaming.
BMI works as an intermediary between songwriters and organizations that wish to play their music on a publicly traded platform. The firm handles rights of around 8.5 million musical works created by more than 600,000 songwriters, along with the composers and music publishers. In order to safeguard the interest of all these music professionals, the company sued Pandora in June over a royalty fee disagreement.
We note that in September, Pandora won a court order against the American Society of Composers, Authors and Publishers (ASCAP), which was trying to limit the number of songs licensed to Pandora. This helped Pandora to access the song resources at ease.
Pandora continues to strengthen its position in the U.S. web-based radio market, as listening hours jumped 18% to 1.49 billion in Nov 2013 from the year-ago month . Listening hours were also slightly better than 1.47 billion reported in October.
Additionally, Pandora’s share of total U.S. radio listening market surged to 8.44% compared to 7.17% in the year-ago month and 8.10% in Oct 2013. Some of these positive developments were also reflected in Pandora’s share price, which moved up 4.41% to reach a level of $28.20 as of Dec 19, 2013.
Moreover, Pandora also has a first mover’s advantage in the music streaming industry. We believe that the company already has a popular service, driven by its effective discovery engine and a well-established infrastructure, which place it well to compete against the likes of Apple (AAPL), Spotify, Google (GOOG) and Sirius XM (SIRI).
Although the recent court ruling acts as a dampener for Pandora, we believe that itis poised for growth in the long run.
Currently, Pandora has a Zacks Rank #3 (Hold).