Pandora Buys Terrestrial FM Station to Gain Lower Music Rate from ASCAP

Posted by at 9:48 am on June 12, 2013

In an effort to qualify for equal music licensing terms as conventional broadcast radio, Internet streaming music service Pandora has purchased Rapid City, SD radio station KXMZ-FM. The purchase comes in response to the American Society of Composers, Authors and Publishers (ASCAP) engaging in what Pandora calls “discriminatory treatment” in licensing music to the Internet streamer.

“We are in the midst of the latest battle, in which ASCAP and its members have abruptly shifted away from 100 years of business practice and attempted to create a new right to ‘withdraw’ from ASCAP the right to license certain songs on what is essentially a case-by-case basis,” wrote Pandora assistant general counsel Christopher Harrison in an editoral published in The Hill, a Washington DC-based political newsletter.

Harrison also wrote that Pandora has filed a lawsuit against ASCAP with the New York federal court, alleging that the media rights group has “violated the terms of its antitrust consent decree with the Department of Justice” in discriminatory licensing against solely online music services. ASCAP has long offered different and substantially smaller rates for broadcast radio stations that also stream their programming on the Internet compared to the rate reserved for Internet-only “stations.”

After ASCAP rules were amended to allow individual publishers to selectively withdraw rights from song catalogs available to online streamers, Pandora was forced to negotiate in the dark with Sony/ATV without a list of tracks that were being withdrawn from the service. The negotiations, up against a tight deadline, resulted in increased streaming rates for the company.

“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,” Harrison wrote in the op-ed. “For this to become reality, Internet radio must be embraced – not discriminated against.”

KXMZ is a “hot adult contemporary” station, with a key demographic between 18 and 54 years of age. The station broadcasts at 102.7MHz with 50kW of power, reaching nearly 175,000 listeners terrestrially, and generally another 5,000 on the Internet.

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