This is a company now waging war to lower its royalty obligations — on all possible fronts. Just this morning, Pandora assistant general counsel Christopher Harrison confirmed that the company has purchased the tiny KXMZ-FM in Rapid City, South Dakota, an equally tiny market. It even comes with a tower.
The reason, as clearly explained by Harrison, is to make Pandora a terrestrial broadcast owner, and therefore subject to lower internet royalty rates.
“Terrestrial broadcasters and their Internet properties were given preferential treatment via a January 2012 agreement between the Radio Licensing Marketing Committee (RMLC) and ASCAP and BMI. To put this in perspective, at least 16 of the top 20 Internet radio services that compete with Pandora operate under the RMLC license that has not been made available to Pandora.”
It’s a clever loophole, one that instantly gives Pandora a lower rate (at least theoretically). And the law is uneven: iHeartRadio, for example, enjoys lower rates, just because it’s owned by Clear Channel, a terrestrial broadcaster.
KXMZ was probably one of the cheapest stations on the market. Harrison (laughingly) discussed the advantages of serving tens of thousands of Rapid City listeners, and in reality, this does little for Pandora’s core business. But the broader context is a dogged fight across multiple theaters: Pandora is suing publishing rights society ASCAP for discrimination, while intensely lobbying both Congress and musicians to relax rates.
Harrison offered a glimpse into the thinking of a company that views itself as extremely embattled, and an oppressed force for good.
“Certain powerful music incumbents see Internet radio as a threat to the status quo. [But] the status quo is a dead end for the vast majority of working musicians and the Internet is driving a sea change that will fundamentally shift the equation away from big industry players towards a more democratic and inclusive industry for both listeners and artists. For this to become reality, Internet radio must be embraced – not discriminated against.
More as it develops.