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Pandora buys FM radio station in surprise move in ongoing royalty battle

By | Published on Wednesday 12 June 2013


So, Pandora – that digital innovator which has, in the US at least, spearheaded the development of online radio-style services and led the ‘interactive radio’ side of the expanding streaming music market – has, erm, bought a good old fashioned FM radio station in South Dakota.

Why? Well, because by owning KXMZ-FM in Rapid City, the Pandora company can take a seat at the table of the Radio Music Licensing Committee which, in theory at least, would enable it to reduce the royalties it pays to the American music publishers via the collecting societies, in particular ASCAP.

The FM station acquisition is the latest development in ongoing squabbles between Pandora and ASCAP, which went legal last November. The digital firm says it is unfair that the royalty terms it has been offered by the collecting society are not as favourable as those enjoyed by conventional broadcasters who also operate basic online music services, and who negotiate all their song licences with ASCAP via the RMLC.

The digital company is most interested in the royalty deals Clear Channel, the biggest FM/AM radio operator in the US, has for its iHeartRadio service, a head-on competitor to Pandora. In its legal action late last year, and a new motion filed this week, Pandora calls for the terms offered to iHeartRadio to be extended to online-only services. But ASCAP, presumably under pressure from the music publishers it represents, has so far not played ball.

The whole affair is further complicated because the big music publishers in the US are in the process of withdrawing from the collective licensing system in the digital domain, despite the music publishers to date generally licensing far more digital services collectively than the record companies. And according to Billboard, the bigger indies like BMG and Kobalt are now planning to follow the majors’ lead on this front.

With that in mind, it will be interesting to see what Pandora can achieve in its ongoing battle to reduce royalty commitments as a new, albeit minor, player in the RMLC. Every time the digital firm pushes for lower royalty rates, on either the sound recording or music publishing sides, it usually results in criticism from the music rights industry, and the artist and songwriter communities.

An interesting side effect of all this, though, will be what happens to the music policy of KXMZ. Pandora says that it has no plans to radically alter the format of the Rapid City station, though it will use data pulled from Pandora users in the region to inform music programming decisions, something Clear Channel could be doing with iHeartRadio, though doesn’t seem to have done so yet. It will be interesting to see what that would do to the station’s musical output, and subsequent listening figures.

Read an article by Pandora’s Assistant General Counsel Christopher Harrison on all this here.