Why it's happening: Keeping in mind Pandora only just issued the press release at 12:16 p.m., the stock's earlier gains came amid speculation a decision was close. After all, Friday marked the end of a 30-day deadline for the Copyright office to issue an opinion on whether Pandora's direct deal with Merlin -- signed in August, 2014 -- could be used as a benchmark for royalties in the case.
"We are pleased that the Copyright Office affirmed the admissibility of Pandora's agreement with Merlin as a valid benchmark in the Copyright Royalty Board proceedings," stated Pandora Spokesman Dave Grimaldi.
For perspective, last year the Copyright Royalty Board initiated rate-setting proceedings with a goal of determining rates and terms for webcasting under the license used by Pandora -- as well as thousands of other digital radio services -- from 2016 through 2020. Royalty collector SoundExchange is arguing for a significant rate hike that Pandora believes would be unsustainable to its current business model. During last quarter's earnings conference call, Pandora CFO Mike Herring stated the company made its final arguments in the trial portion of the case in July, and was awaiting the CRB's decision.
Today's decision undermines SoundExchange's argument, and represents an overwhelmingly positive development for Pandora. But it also seems to make sense for record labels and distributors. Pandora has previously noted over 90% of the 20,000 labels represented by Merlin have chosen the opt-in privilege for the partnership.
Now with Merlin in place as a benchmark, Pandora awaits a final decision in the CRB proceedings by the end of the year. To be fair, keep in mind Pandora has previously stated that even if the CRB issues a negative ruling, Pandora still has the option of pursuing more direct deals with labels similar to its agreement with Merlin.
"We look forward to the certainty that December's decision will bring," added Grimaldi, "and are prepared to thrive in a number of potential outcomes."
So while it's hard to blame the market for bidding Pandora stock up on today's affirmation of its stance, it seems Pandora has already ensured it will come out on top no matter what the CRB says later this year.
