Pandora can now start playing music -- on the FM dial.
Broadcast approval for Rapid City, South Dakota's KXMZ, which Pandora purchased for $600,000 in the summer of 2013 was finally given the green light by the FCC last night. The license underwent a long delay because of a Communications Act law preventing broadcast radio stations from being owned by foreign entities.
The station purchase was part of a savvy move by Pandora, which will now look to take advantage of lower royalty rates offered by ASCAP, which manages performance rights, to companies which own broadcast radio stations and the digital radio services those broadcasters operate. ASCAP's settlement with the Radio Music Licensing Committee, which represents the majority of U.S. radio stations, sets a blanket license fee of 1.7 percent of gross revenue, less standard deductions. Currently, Pandora pays the PRO 1.85 percent of revenue.
Dave Grimaldi, Pandora's director of public affairs, said in a statement this morning that "“Pandora is radio, and the acquisition of KXMZ would qualify Pandora for the same RMLC license under the same terms as our competitors. This move makes sense to us beyond the licensing parity alone," going on to say the company was excited to work with the local community in Rapid City. BMI are currently awaiting a decision on recent arguments delivered in Manhattan court that will set rates for that PRO.
ASCAP opposed the radio station license approval, but the FCC disagreed that its arguments pertained to any potential conflict regarding foreign ownership rules. "With respect to ASCAP’s allegations regarding Pandora’s motivation in acquiring the Station," the FCC writes, "the Act does not require us to examine the business rationale" of a sale, only whether it runs afoul of foreign ownership law."
ASCAP issued a statement to Billboard on the news, writing that "Pandora has to comply with a number of requirements pertaining to its foreign ownership. It has 90 days to do so; and assuming it does comply with the FCC's requirements, the FCC will then consider Pandora's application for permission to purchase KXMZ. In the meantime, ASCAP will be considering what, if any, additional comments to make, or other steps to take, in light of the FCC's Declaratory Ruling. Pandora’s purchase of KXMZ is a transparent ploy squarely aimed at paying songwriters even less for online music streams and serves as yet another example of the urgent need for reform of the nation’s music licensing system."
The FCC cites two separate studies of the company's stock in its ruling, which determined a majority (between 82 to 83.5 percent) of the broadcaster's stock to be held by U.S. interests, as well as no single foreign shareholder as possessing more than a 5 percent share in the company. The ruling requires Pandora to more closely monitor foreign investment and to re-submit its finding biannually.
The David Israelite, CEO of the National Music Publishers Association, called Pandora's purchase "cynical and shameless," calling the station a "pawn in Pandora's game," concluding that "now, there can be no doubt that Pandora has declared war on songwriters."
Commissioner Michael O'Rielly was also dismissive of the FCC's policies as related to broadcast purchases, writing that "the Commission can, and should, go beyond the current case-by-case approach to these requests by setting rules and policies affirmatively permitting more foreign ownership."
Commission Ajit Pai, in his statement, writes that "the Commission has tied itself (and Pandora) in knots trying to determine whether foreign interests own more than 25 percent of Pandora stock, and if so, whether Pandora should be able to own a single FM radio station in a small South Dakota town. This is absurd."
Updated, 9:49AM ET with a statement from Pandora.