Pandora Radio Station Buy Doesn't Guarantee Lower Rights Rate, Lawyers Say
An FCC draft order that would let Pandora buy a South Dakota radio station won’t automatically lead to the streaming radio service being able to buy music rights at the same rate as terrestrial radio stations, said music rights and broadcast attorneys in interviews Thursday. FCC officials have said a draft order is on circulation that would let Pandora buy KXMZ (FM) Box Elder, South Dakota, as long as Pandora can show that it's less than 49 percent foreign-owned (see 1504280046). Pandora is expected to be able to satisfy the condition, said industry lawyers. Pandora has said it wants to buy the station to let it buy music at the lower price enjoyed by terrestrial radio stations.
The streaming music company faces rate negotiations with performing rights organizations and likely court battles before that could be realized, and its radio station buy could face appeal at the FCC, said broadcast and music rights lawyers. “Pandora is radio, and the acquisition of KXMZ would qualify Pandora for the same RMLC [Radio Music License Committee] license under the same terms as our competitors,” said Pandora Director-Public Affairs Dave Grimaldi.
If Pandora’s transaction is approved, the streaming radio service would likely next inform the rights organization American Society of Composers, Authors and Publishers that it intends to seek to buy rights under the same RMLC license used by broadcast radio stations. ASCAP opposes Pandora’s plan, a spokeswoman said. She said the RMLC “was designed for businesses that earn more than 95 percent of revenue from traditional AM/FM radio advertising, not a huge online music company that buys a radio station with 18,000 listeners.”
ASCAP will likely oppose in court Pandora’s attempt at a lower rate, said industry lawyers. “American songwriter earnings will certainly decrease even further if Pandora is able to succeed in its unabashed effort to further disadvantage music creators,” said ASCAP. It’s possible ASCAP would file a petition asking the FCC to reconsider its decision in Pandora’s favor or seek to appeal the decision in court, said industry attorneys.
The 49 percent threshold for foreign ownership could open the door for similar percentages of foreign-owned broadcasters, said a broadcast attorney. Pandora is the first company to seek a license transfer with more than a 25 percent foreign-ownership percentage since the FCC relaxed foreign-ownership rules. Though some attorneys have said Pandora’s situation is unique and difficult to apply to future ownership situations, it could still be a precedent and make it difficult for the FCC to deny future ownership by companies up to 49 percent foreign owned, said a broadcast lawyer. Pandora said it doesn’t have substantial foreign ownership, but instead is disadvantaged by FCC rules that considers owners whose nationality can’t be determined to be foreign. Widely held public companies often have shareholders whose identities and nationalities can’t be determined, Pandora argued.
If Pandora is granted a broadcast license, it could have implications beyond music rates, attorneys said. The streaming service could be seen as bound by regulations that affect terrestrial radio stations, such as rules about sponsorship identification, said Chris Castle, a music rights attorney who represents artists. The purchase is about more than music rights, said Pandora. “We are excited to apply Pandora’s insights about listening habits to music programming that will reflect local listeners’ evolving tastes.”