Pandora Purchase Of FM Station Clears FCC, Lower Payments To Artists Likely

Pandora has long complained that the rates it pays to play music are too high. It's fought that battle in the courts, with lobbyists and with regulatory bodies. Just as it appeared that creators were gaining ground, Pandora has scored a major victory.

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Pandora has been vocal and aggressive in its efforts to lower the rates it pays to play music. The music streamer has often used the lower payments that broadcast radio stations pay to play music online as an example of what it claims is unfair rate setting.

Back in 2013 Pandora made an offer to purchase South Dakota's KMXZ – FM to illustrate the issue. After public outcry led by ASCAP delayed a decision, yesterday the FCC approved the purchase. "With respect to ASCAP’s allegations regarding Pandora’s motivation in acquiring the Station," the commission wrote in its ruling, "the Act does not require us to examine the business rationale of a sale, only whether it runs afoul of foreign ownership law."

Lower Payments To Artists Ahead

Lower payments to performing right organizations and thus artists seem likely; particularly since its is a publicly traded company whose sole purpose is to return value to shareholders. Pandora legal counsel Christopher Harrison laid out the rationale behind the company's radio station purchase:

"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. … This acquisition allows us to qualify for the same RMLC license under the same terms as our competitors."

Recent rulings set the rate paid by U.S. broadcast radio stations to PROs at 1.7% percent of gross revenue, less standard deductions. Pandora pays 1.85% of revenue.

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