Pandora is getting into FM radio, with the acquisition of a station called KXMZ-FM in Rapid City, South Dakota. A startling pivot from personal radio to the more traditional kind of broadcasting? Well, not as such. It’s all about the royalty payments.
Pandora is furious that while music publishers are able to withdraw their catalogues from performing rights body ASCAP in order to negotiate direct (more expensive) deals with Pandora, while terrestrial broadcasters who also own Pandora-like digital services can sign a separate Radio Licensing Marketing Committee (RMLC) licence without the withdrawals.
“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,” writes Pandora’s Christopher Harrison in a blog post explaining the KXMZ-FM acquisition. ”This acquisition allows us to qualify for the same RMLC license under the same terms as our competitors.”
Although he also says Pandora will be taking its new responsibilities seriously, using data on the listening habits of the 42k existing Pandora users in Rapid City to “program music that accurately reflects local listeners’ evolving tastes”.
But really, this is about Pandora exploiting a legal loophole to continue its fight with ASCAP and publishers to lower, rather than raise its royalty commitments.
Harrison says Pandora is filing a motion in federal district court in its pending rate case with ASCAP alleging “discriminatory treatment of Pandora and other Internet radio companies by ASCAP and their publishing industry members”, citing Clear Channel’s iHeartRadio as one of the main beneficiaries.
iHeartRadio’s growth – it has 60m monthly unique users, with 30m registered for its Pandora-like ‘custom stations’ – is clearly rattling Pandora, alongside the ongoing licensing debate.
The danger for Pandora is that while it argues for fair treatment compared to rivals, its actions will inevitably be painted as its latest attempt to dodge fair payouts for artists and songwriters.
Industry lawyer Chris Castle got in quick with a blog post voicing this idea: “Pandora has now demonstrated unequivocally that they loathe songwriters so much that they’d literally do anything to screw them… a shockingly brazen stunt on the short con.”
And with more attention turning to founder Tim Westergren’s monthly $1m sale of Pandora shares, every move the company makes to reduce its royalty commitments – KXMZ-FM included – makes the debate that little bit more toxic.