Pandora In Legal Battle Over Music Content Rights

SunTrust Robinson Humphrey issued a special report on Thursday giving its perspective on the Department of Justice discussing plans to allow music publishers to negotiate directly with Pandora Media Inc (NYSE: P) and other digital service providers.

SunTrust rates Pandora as a Buy, while a price target is unavailable.

Analysts Bob Peck and Matthew Thornton wrote, "Large publishers have attempted to pull their works from ASCAP and BMI in order to force direct deals with Pandora at rates above the statutory rates determined by the courts per the consent decree. Judge Cote ruled this action to not be permissible per the consent decree and reprimanded the publishers and ASCAP...Judge Stanton interpreted the consent decree differently and ruled that publishers could not license their works to some under the statutory rate and then negotiate direct with others...Those publishers have opted back into the PROs, at least for now, but this issue remains unresolved.

"In isolation, the headlines appear negative for Pandora… However, there is still much process to come and it is extremely premature to draw conclusions."

Related Link: SunTrust's Bob Peck Offers Scenarios For Pandora's Copyright Royalty Board Ruling

SunTrust believes that if this ruling is to be further discussed, there are several important items that need to be considered:

• PROs and labels would have to operate with transparency. This would entail operating a computer readable database detailing ownerships of all works in their repertoires.
• Publishers could have to give six months "notice of intention to withdraw."
• If publishers negotiate directly with Pandora, payments into the PROs would be recalibrated to account for the value of those works withdrawn from the PRO inventories.

Shares of Pandora closed Wednesday at $17.24.