As Tone Deaf previously reported, online streaming giant Pandora has been embroiled in a war against performer’s rights organisation BMI over the service’s royalty rates. Pandora have been looking to cut their current rate of 1.75 percent to 1.7 to match the rates paid by radio, while BMI is seeking 2.5 percent for their members.
While the case is naturally chock-full of convoluted legal mumbo jumbo, the situation boils down to this: Pandora don’t want to hand over more money than radio stations do, while BMI want them to hand over significantly more than they have previous since, they argue, Pandora is more interactive than radio.
New legislation concerning royalty rates is currently being overlooked by key regulatory bodies in US courts, and the battle between BMI and Pandora recently shifted to Capitol Hill. What’s more, Pandora just got some serious muscle in the battle against higher royalty rates with a coalition of major companies banding together to fight an increase.
But it now appears that Pandora have found the means to get their way. As Digital Music News reports, the US’ Federal Communications Commission (FCC) have now unconditionally approved Pandora’s acquisition of KXMZ-FM, a tiny radio station located in South Dakota.
What would a pioneering streaming monolith like Pandora want with a small midwest radio station? According to DMN, the acquisition allows Pandora to pay even lower royalty rates to publishers and songwriters. For just $600,000, Pandora has effectively been re-qualified as a traditional broadcaster.
Such a status means that Pandora can pay far lower royalty rates to performance rights organisations such as ASCAP. If that sounds like they’ve exploited an obscure loophole, it might interest you to know that ASCAP and the rest of the publishing community fought against such practices for years.
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While the situation obviously raises the question of why ASCAP has a lower royalty rate for big, traditional broadcasters that also stream online, Pandora have immediately begun pointing to synergies between their global online radio empire and KXMZ, which serves the good people of Rapid City, South Dakota (pop. 114,000).
As Hypebot notes, with Pandora’s bid to buy KXMZ approved — the FCC claimed that they are not required to “examine the business rationale of a sale, only whether it runs afoul of foreign ownership law” — lower payments to performance rights groups, and thus artists, seems likely.
“Terrestrial broadcasters and their Internet properties were given preferential treatment via a January 2012 agreement between the Radio Licensing Marketing Committee (RMLC) and ASCAP and BMI,” said Pandora legal counsel Christopher Harrison.
“To put this in perspective, at least 16 of the top 20 Internet radio services that compete with Pandora operate under the RMLC license that has not been made available to Pandora. This acquisition allows us to qualify for the same RMLC license under the same terms as our competitors.”
“In the history of the struggle between creators and those who try to profit off of their work without paying them fairly, this move by Pandora ranks as the most cynical and shameless,” said David Israelite, head of the National Music Publishers Association (NMPA).
“Sadly this small station in South Dakota has become a pawn in Pandora’s game to pay the creators on which it built its business even less.” he added. “Now, there can be no doubt that Pandora has declared war on songwriters.”
