MUMBAI: As other major music services like Apple and Spotify get ahead in the race, internet radio company Pandora has taken an innovative and unexpected move to stay ahead in the rat race. Pandora has acquired terrestrial radio station KXMZ-FM in Rapid City, South Dakota in a bid to lower royalties.
The move comes after the company was upset over the high royalties it had to pay to music publishers. In an ongoing legal fight with the performance-rights group American Society of Composers, Authors and Publishers (ASCAP), Pandora stated that ASCAP discriminates against the company by charging higher royalty rates, and letting publishers pull their song catalogues from Pandora while keeping them available for competitors.
As per reports, terrestrial radio stations and the Internet properties that own them ‘were given preferential treatment’ through an ASCAP agreement with the Radio Licensing Marketing Committee (RMLC) last year. The RMLC represents the majority of radio stations in US.
Apparently Pandora also has a pending case against ASCAP and will be filing a motion alleging that ‘ASCAP has violated the terms of its antitrust consent decree with the Department of Justice’.
Pandora had earlier filed a complaint in the federal district court that sought an adjustable-fee blanket license with terms available to Internet radio services under the settlement between the Radio Music Licensing Committee (RMLC) and ASCAP in 2012. The settlement covers both broadcast and Internet performance royalties and sets a blanket license fee of 1.7 per cent of a licensee's gross revenue less standard deductions (12 per cent of revenue for broadcast stations, 25 per cent for Internet services).
A broadcaster covered by the RMLC can also offer a standalone, non-interactive Internet radio service that is covered by the RMLC rates and deductions. Also a shift to RMLC rates would help the companies in maximum savings.
Pandora says the KXMZ acquisition will let it qualify for the lower-fee RMLC license. Reportedly, Clear Channel-owned rival iHeartRadio also possesses such a license because it also owns a terrestrial station.
On the other hand, ASCAP accused Pandora of ‘trying every trick in the book to brazenly and unconscionably underpay’ rights holders. In a statement, the group also argued that ‘Internet and traditional AM/FM radio services are very different businesses with different formats’.
However, the online music service acknowledged that the station buy ‘might seem like an unexpected move’, but the company insisted its interests were not entirely about royalty fees.
In a blog post, Pandora assistant general counsel Christopher Harrison said, “Certain powerful music incumbents see Internet radio as a threat to the status quo. We look forward to broadcasting our personalized experience to the community in Rapid City, an area where over 42,000 residents already use Pandora. And we will apply Pandora's insights about listening habits to program music that accurately reflects local listeners' evolving tastes.”
According to recent data, KXMZ FM was previously owned by Connoisseur Media LLC. The station plays ‘adult contemporary’ music by artists like Justin Timberlake and Bruno Mars and has an average listenership of 18,000 as of early last year.