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Pandora gets green light to buy FM radio station

By | Published on Wednesday 6 May 2015

Pandora

As anger in the music community towards Pandora only gets more vocal, a sneaky move by the American digital music service initially made back in 2013 has been green lighted.

As previously reported, in June 2013 Pandora announced that it had acquired a traditional FM radio station in South Dakota called KXMZ. Why? Well, because being in the FM radio business would give Pandora a seat at the table of the Radio Music Licensing Committee, which negotiates with the US music publishing sector’s collecting societies on the licences required for both traditional broadcasts and the online operations of traditional broadcasters.

It’s sneaky because the RMLC has negotiated lower rates from the collecting societies than Pandora itself, with the top line figures for ASCAP 1.7% of gross revenue rather than Pandora’s 1.85%. Pandora therefore hopes the move might reduce its royalty obligations.

The FM station purchase has been delayed because it needed to be approved by American media regulator the FCC. The main point of contention was ownership – because of laws restricting foreign ownership of American media – but in a declaratory ruling the FCC said this week it was happy the majority of the shares (over 80%) in the publicly listed Pandora were owned by American concerns, with no foreign shareholder owning anymore than 5% of stock.

And while the company still needs to make some commitments to the FCC about ownership moving forward, the regulator seems happy for the acquisition going ahead, adding that Pandora’s motives in buying KXMZ were not its concern.

Commenting on the FCC’s decision, Pandora’s public affairs chief Dave Grimaldi said: “Pandora is radio, and the acquisition of KXMZ would qualify Pandora for the same RMLC license under the same terms as our competitors. [But] this move makes sense to us beyond the licensing parity alone”.

Needless to say, the US music publishing community is not impressed with the development. Collecting society ASCAP said it was reviewing its options, before adding: “Pandora’s purchase of KXMZ is a transparent ploy squarely aimed at paying songwriters even less for online music streams and serves as yet another example of the urgent need for reform of the nation’s music licensing system”.

As previously reported, the US publishers want collective licensing rules in the country changed so that they can force digital services to licence directly from the rights owners while still licensing traditional broadcasters and public performance through their collecting society system.



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