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Pandora Buys South Dakota FM

The company says the move is an attempt to lower its music streaming royalty rates

Pandora is getting into the broadcast radio business. The move is an effort to lower its music royalty payments.

In a filing with the Securities and Exchange Commission, Pandora states it’s paying Connoisseur Media $600,000 for KXMZ(FM), Rapid City, S.D. and has begun operating the station under an LMA.

“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,” says Pandora Assistant General Counsel Christopher Harrison in an op-ed for The Hill.

Harrison also says the purchase allows the Internet streaming service to qualify for the same Radio Music Licensing Committee royalty rates that broadcast radio pays ASCAP and BMI.

Pandora has been lobbying for lower music license rates for awhile, saying it’s stuck with higher rates than either satellite radio or terrestrial radio pays for streaming, hindering efforts to maintain profitability. Indeed, during a Congressional hearing on royalty fees last year, one venture capitalist said his company didn’t get into the music streaming business because it doesn’t see it as a successful business model.

Last year, the RMLC reached new agreements with ASCAP and BMI to cut the on-air and streaming royalties radio broadcasters pay. Harrison says ASCAP denied Pandora a rate matching what Clear Channel pays for its iHeartRadio streaming service, because iHeartRadio “is owned by a terrestrial broadcaster.”

In November, Pandora filed a petition in a New York federal court asking the judge to set a reasonable rate for streaming ASCAP songs.

Harrison says Pandora has filed a new motion in New York federal district court against ASCAP alleging “discriminatory treatment,” saying that ASCAP violated terms of an antitrust consent decree with the DOJ. Pandora alleges ASCAP allowed some music publishers to selectively withdraw the media rights for their song catalogs from the organization, “forcing Pandora to negotiate a direct agreement against a ticking clock” so it could continue to stream songs from the publisher’s catalog, according to Harrison.