Pandora Bought An FM Radio Station To Lower Their Royalty Rates

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Pandora has acquired an FM station in Rapid City, South Dakota called KXMZ-FM, according to The Hill.  Why would an online radio streaming service acquire a brick-and-mortar FM radio station?  Content.  Pandora believes that The American Society of Composers, Authors and Publishers (ASCAP) is unfairly treating Pandora in terms of royalty rates.

Pandora will likely file a motion against the organization in federal court as a result.  Pandora cites anticompetitive behavior in the motion that they are filing.

Below is an excerpt from the filing:

“The motion outlines how we believe ASCAP has violated the terms of its antitrust consent decree with the Department of Justice by (a) discriminating in license fees and terms between Pandora and other similarly situated licensees such as Clear Channel’s iHeartRadio; (b) failing to provide required transparency in identifying songs ASCAP claims it can license to Pandora; and (c) creating a scheme by which member-publishers can withdraw their catalogs from ASCAP’s license for Pandora but allow them to remain for everyone else, including competitors like iHeartRadio.”

By owning a radio station, Pandora should now be able to qualify for the same rules that other terrestrial radio stations can enjoy, which means unrestricted access to music and different royalty rates.  In late 2012, a bill was introduced to Congress that would align radio royalty rates to fees charged to other radio providers.  This act is supposed to lower the royalty rates that online radio providers pay.  Terrestrial radio stations pay next-to-nothing for playing music.  Unfortunately, Internet radio stations end up having to make up the difference.

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