Pandora is trying a new tactic in its ongoing fight to pay lower royalties: buying a random radio station in South Dakota.
KXMZ-FM, in Rapid City, is a pretty typical radio station that plays “today’s best hits.” But now it’s a pawn in Pandora’s game with lawmakers.
Pandora paid $US600,000 for the radio station as part of a bid to pay the same 1.7% publisher and songwriter royalty rates as traditional radio companies like iHeart Media, which runs over 840 radio stations, Bloomberg reports.
Right now, the rates Pandora pays that are potentially affected by the KXMZ-FM deal stand at about 4% of revenue. The drop to 1.7% could mean millions of dollars saved.
Founder Tim Westergren wrote in testimony that the nearly half of Pandora’s revenue it pays in total royalties — the bulk of which is for the recording — is “unreasonable.” Even so, it does pay less than competitors like Spotify, which has to pay almost 70% of its revenue to the music industry. But in the argument over royalties, it depends on what your definition of “competitors” is.
Pandora is trying to frame its competitors as the operators of terrestrial radio stations, like iHeart Media. In an email to Bloomberg, Pandora’s director of public affairs, David Grimaldi, said the company just wants the “same terms as our competitors.” He’s not talking about Spotify. Traditional AM and FM stations do not have to pay the Internet radio royalty rates that Pandora does — even if they stream music over the Internet.
KXMZ-FM is one step toward Pandora making the case that it is more like iHeart Media than Spotify, but royalty collectors are not convinced. The American Society of Composers, Authors and Publishers (ASCAP), called the FCC ruling that allowed Pandora to buy the station “arbitrary and capricious,” Law360 reports. ASCAP regards the purchase as a “a transparent ploy to pay songwriters even less for the right to stream their music online.”
Pandora has hired two lobbying firms and spends about $US500,000 per year to try to spin the story the other way, according to Bloomberg.
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