[Updated] Pandora Purchases Broadcast Radio Station

[Update (6/13/13)]: BMI has ended negotiations for publishing rates with Pandora and has decided to file suit in rate court. Billboard’s sources claim BMI management believes further negotiations with Pandora would be futile, in light of what publishers are calling a questionable maneuver to obtain lower rates than the 4.1 percent of revenue that Pandora paid to publishers last year.

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Pandora has signed an agreement to purchase Rapid City, S.D. radio station KXMZ-FM, a small-market Hot AC format broadcast radio station.

The strategic purchase is reportedly a way for the company to qualify for Radio Music Licensing Committee (RMLC) agreements regarding royalties and public performances of musical works from the PROs.

An op-ed by assistant general counsel at Pandora, Christopher Harrison explains the streaming service has been discriminated against and exposed to copyright infringement as a result of ASCAP members withdrawing new media rights:

ASCAP and its members have abruptly shifted away from 100 years of business practice and attempted to create a new right to ‘withdraw’ from ASCAP the right to license certain songs on what is essentially a case-by-case basis.

Terrestrial broadcasters and their Internet properties were given preferential treatment via a January 2012 agreement between the RMLC and ASCAP and BMI. 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.

So, today we are also announcing the purchase of KXMZ-FM. This acquisition allows us to qualify for the same RMLC license under the same terms as our competitors. While this might seem like an unexpected move for Pandora, it makes sense even beyond the licensing parity. Pandora excels in personalizing discovery and terrestrial radio is experienced in integrating with a local community. 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.

ASCAP and NMPA responded harshly to the acquisitions on June 12. “Pandora is trying every trick in the book to brazenly and unconscionably underpay and take advantage of the creative labor that produces the core offering of their business — music written by individual songwriters and composers,” said ASCAP president Paul Williams (see his full statement). David Israelite, president and CEO of the NMPA stated: “While other digital partners are making voluntary deals, Pandora chooses to sue the very creators who make its business possible.”

In addition to EMI and Sony/ATV withdrawing new media rights from ASCAP and BMI in previous years, Billboard highlights forthcoming new media withdrawals dates from ASCAP as follows:

BMG/Chrysalis: July 1, 2013
Universal Music Publishing: July 1, 2013
Warner/Chappell Music Publishing: July 1, 2013
Kobalt Music Publishing: Oct. 1, 2013
Ruminating Music: Oct. 1, 2013
Sea Gayle Music Publishing: Jan. 1, 2014

– Jessica Nicholson & Eric Parker