NY Post : Battle over royalty rates for digital services headed to federal court

The row over streaming music royalties is getting louder.
Players on both sides of the debate are gearing up for a key hearing next week in Washington that will help determine the digital royalty rates dictated by federal law.
One the one side, online radio service Pandora is asking the Copyright Royalty Board, a government body that controls what music labels can charge for streaming songs, to reduce the fees it pays to music labels — its biggest expense.
On the other, SoundExchange, a licensing group that represents the major music companies, is asking for a significant hike in recorded royalties.
On Monday, a panel of three federal judges appointed by the Library of Congress will hear statements made by big-name digital radio players from Pandora to iHeart Radio and Liberty Media’s Sirius.
While a decision isn’t expected before the end of the year, industry insiders are already handicapping the odds of a rate hike.
“It isn’t a question of whether rates will go up but how much,” said one source close to the record labels. “Expect it to be at least a 40 percent increase.”
At an investor event last month, Pandora’s chief financial officer Mike Herring said, “The case we’ve made in front of the CRB is a solid one, and we’re confident that we’ll get a reasonable rate.”
Music sources explain that they are looking to end the 50 percent “discount” they granted Pandora in its infancy to help it get off the ground.
Streaming services pay fractions of pennies for a single song stream. In Pandora’s case, it works out to 13 to 14 cents per 1,000 song streams, while the labels want the fee to reset to 30 cents.
Some Wall Street analysts are predicting that the new rate will be a compromise — or around 20 cents per 1,000 streams. Richard Tullo, an analyst for Albert Fried & Co. who has a sell rating on Pandora ahead of its quarterly report Thursday, said streaming rates “could be 10 percent to 30 percent higher by the end of 2016.”
He added: “The rate paid today is about 40 percent less than what would have been as the SoundExchange cut the rate to about 14 micro pennies from about 23 micro pennies.”
Morgan Stanley analyst Ben Swinburne weighed in on April 20 in a note saying, “Our most bearish case assumes the CRB takes its existing rate structure (not P’s lower rate) and grows it 10 percent sequentially in 2016 and five percent from 2016-20.”
The CRB will decide royalty fees starting in 2016 through 2022 and will also take a look at which services are deemed interactive and non-interactive. Pandora, for instance, doesn’t allow users to do much more than chose a station based on an artists name in its free ad-supported version.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: MOBL -33.2%, ( announces CFO resignation to join another company; Will be staying through submission of the 10-Q filing no later than May 4, 2015 ), ERIC -11.9%, TXN -8.4%, PNK -8.4%, SNE -6.7%, (Guided yesterday) PHM -6.4%, WBC -5%, MTH -4.7%, OII -4.5%, LVS -4.1%, PBR -3.4%, XLNX -3.1%, UNP -2.9%, TSO-2.8%, HSY -2.6%, MMM -2.5%, QCOM -2.4%, ZNH -2.3%, FCX -2.3%, UAL -2.1%, ALK -2%, PG -1.9%, FFIV -1.8%, VMI -1.6%, MCRI -1.5%, MO -1.5%, DHR -1.2%, ALXN -1.2%, PENN -1.2%, KNX -0.9%, DGX -0.9%, FISI -0.8%, FB -0.8%, MJN -0.7%, PEP -0.6%, POOL -0.6%, USTR -0.5%, AMP -0.5%, CVBF -0.5%, UFI -0.5%

M&A news: TWC -3.1% (WSJ details news that FCC will hold hearing on Comcast (CMCSA) & Time Warner (TWC) merger)

Other news: NBG -4.2% (cont volatility surrounding Greece default), TNP -4.1% (prices 8.75% Series D Cumulative Redeemable Perpetual Preferred Shares (was upsized to $85 mln) and will issue 3.4 mln Series D Preferred Shares at $25.00 per share), LOOK -2.9% (slight pull back after yday's advance), WYNN -2.1% (following LVS results), AA -1.6% (reports that China will end taxes on aluminum-alloy & rare earth ores), EC -0.9% (announces that the Supreme Court of the Netherlands has ruled in its favor in the Llanos Oil Exploration), RY -0.6% (filed registration statement for $15 bln offering of covered bonds)

Analyst comments: AIXG -3.9% (downgraded to Neutral at Equinet), OC -2.4% (downgraded to Sell from Neutral at Citigroup), ADTN -1.7% (downgraded to Neutral from Buy at Goldman), ANGI -1.7% (downgraded to Under Perform from Market Perform at Northland Capital), SWC -1.3% (downgraded to Hold at BB&T Capital Mkts), NE -1.2% (downgraded to Underweight from Equal-Weight at Morgan Stanley), TOT -0.8% (downgraded to Hold from Buy at Deutsche Bank
)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: DNKN +8.8%, AFOP +7.2%, SKX +6.8%, MKSI +6.1%, CAKE +5.6%, DPZ +5.2%, EBAY +4.7%, ORLY +4.3%, SGMO +4%, ENTR +3.9%, CAT +3.9%, PII +3.7%, IR +3.7%, SWK +3.6%, SCSS +3.2%, CLGX +3.2%, CAM +3%, EQT +2.8%, LOGI +2.7%, NEU +2.1%, SNA +2.1%, NVS +1.9%, CLB +1.8%, ADPT +1.8%, ABBV+1.8%, DOW +1.7%, DAN +1.7%, LUV +1.7%, TYL +1.6%, KKR +1.5%, T +1.2%, BAX +1.1%, BMS +1.1%, RTN +1.1%, JCI +1.1%, EGBN +0.8%, CTXS +0.7%, SLM +0.6%, LLY +0.6%, AEP +0.6%

M&A news: ARRS +19.4% (to Acquire Pace plc for $2.1 Billion in Stock and Cash PRN), CLVS +2.3% (Bloomberg real M&A column discusses that CLVS may be a possible takeover target)

Select oil/gas related names showing strength: USEG +4%, SD +2.7%, SDRL +1.9%, RIG +0.9%

Other news: CYTX +7.3% (announces data two BARDA funded preclinical studies at the 2015 American Burn Association Meeting), NCR +3.9% (WSJ reporting co is exploring strategic options including divestitures, buybacks, or dividend), SCYX +3.9% (prices 4,675,324 shares of its common stock at $7.70 per share), CNAT +3.3% (clinical results at EASL meeting support Emricasan registration pathway in NASH), GWPH +1.7% (announced new physician reports of clinical effect and safety associated with the Epidiolex expanded access program: median 54% reduction in seizures after 12 weeks treatment and maintenance of clinical effect at 24 weeks), TRCO +1.6% (priced secondary offering of ~9.24 mln shares of common stock at $56 per share),YGE +1.6% (agreement ~524K sq meters of land that is not currently in active use, for RMB 588.2 mln), ISIS +1.4% (reports positive data from its ISIS-TTR Rx study to treat patients with TTR Amyloidosis, demonstrating up to a 92% reduction in transthyretin proteins ), CONN +1.3% (Point72 Asset Management discloses 5.0% passive stake in 13G filing ), OCR +0.9% (late higher following reports suggesting company considering sale ), JUNO +0.9% (Juno and AstraZeneca's (AZN) MedImmune announce immuno-oncology clinical trial collaboration)

Analyst comments: SGMO +4% (initiated with an Outperform at BMO Capital), QURE +3.7% (initiated with an Outperform at BMO Capital), BLUE +1.1% (initiated with an Outperform at BMO Capital), RDS.A +0.8% (upgraded to Hold from Reduce at HSBC), ASML +0.8% (upgraded to Hold at Baader Helvea)

>>> Peabody Energy misses by $0.30, misses on revs

Peabody Energy misses by $0.30, misses on revs

Reports Q1 (Mar) loss of $0.62 per share, excluding non-recurring items, $0.30 worse than the Capital IQ Consensus Estimate of ($0.32); revenues fell 5.5% year/year to $1.54 bln vs the $1.61 bln consensus. Q1 revenue fell YoY due to lower realized pricing and a shift in U.S. production mix toward the Southern Powder River Basin.
  • Q1 adjusted EBITDA of $165.6 million declined 6% YoY, and includes the impact of $100 million in lower pricing and the timing of Resource Management transactions.
  • "In the face of market headwinds, Peabody's first quarter performance demonstrates the underlying strength of our business as ongoing cost improvements largely overcame lower coal prices and the impact of hedging."

>>> KKR beats by $0.09, beats on revs

KKR beats by $0.09, beats on revs

Reports Q1 (Mar) earnings of $0.62 per share, excluding non-recurring items, $0.09 better than the Capital IQ Consensus Estimate of $0.53; revenues fell 5.2% year/year to $294.4 mln vs the $262.08 mln consensus.
  • "We had a good start to the year with strong returns and cash flow generation, which translated into $599 mln of economic net income and $517 mln of total distributable earnings. Additionally, our balance sheet continues to perform, resulting in a 20% cash return on equity over the twelve months ending March 31st."

>>> AbbVie beats by $0.09, beats on revs; raises FY15 EPS, ~in-line

AbbVie beats by $0.09, beats on revs; raises FY15 EPS, ~in-line

Reports Q1 (Mar) earnings of $0.94 per share, excluding non-recurring items, $0.09 better than the Capital IQ Consensus Estimate of $0.85; revenues rose 10.5% year/year to $5.04 bln vs the $4.97 bln consensus.
  • On an operational basis, sales increased 17.8 percent, excluding a 7.3 percent unfavorable impact from foreign exchange rate fluctuations.
  • First-quarter sales growth was driven by the continued strength of HUMIRA and other promoted products. Global HUMIRA sales increased 18.0 percent, or 26.0 percent on an operational basis, excluding the impact of foreign exchange rate fluctuations.
  • Total company sales growth was also driven by the launch of Viekira, as well as strong operational growth from other key products including Synagis, Synthroid, Creon and Duodopa. Viekira sales $231 mln
Co raises FY15 adj. EPS to $4.10-4.30 from $4.05-4.25 vs. $4.29 Consensus.