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Pandora to hit airwaves with terrestrial radio station buy

Seeks end-run around 'discriminatory' music license terms

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Streaming music service Pandora has announced that it has purchased a terrestrial radio station, in a move it says will allow it to negotiate more favorable license terms from music publishers.

In an editorial published by political website The Hill on Tuesday, Pandora assistant general counsel Christopher Harrison writes that Pandora has bought KXMZ-FM, currently a "hot adult contemporary" station broadcasting out of Rapid City, South Dakota.

Harrison says the sale qualifies Pandora to apply for the same Radio Licensing Marketing Committee (RLMC) license enjoyed by many of its competitors, rather than negotiating with the American Society of Composers, Authors, and Publishers (ASCAP) for an alternative license designed for internet broadcasters.

Since late 2012, Pandora has been embroiled in a legal battle with ASCAP over what it claims are unfair terms that favor traditional broadcasters – and in some cases, Pandora's online competitors.

By way of example, Harrison cites the iHeartRadio service, which has managed to secure an RLMC license solely because it is owned by a terrestrial broadcaster – namely, national media giant Clear Channel Communications. Although iHeartRadio's service is substantially similar to Pandora's, Pandora has so far been denied the same license.

That imbalance has hurt Pandora in the market in several ways, Harrison claims. He notes that Pandora has outlined what it believes to be ASCAP's discriminatory practices in a new motion filed with the court, the text of which will soon be made public.

Among Pandora's allegations are that ASCAP amended its rules to allow music publishers to selectively withdraw their catalogs from its licensing scheme, which Harrison alleges was a violation of ASCAP's consent decree with the Department of Justice.

The revised rules permit music publishers to license their music to terrestrial broadcasters while at the same time refusing to license it to internet broadcasters, which Harrison says allowed ASCAP and an unnamed publisher to pressure Pandora into licensing songs at increased rates. Naturally, once Pandora caved to one publisher's demands, others followed suit.

By purchasing a radio station, Harrison explains, Pandora becomes a terrestrial broadcaster, allowing it to avoid any future such strong-arm tactics by the publishers. In addition, he says, Pandora plans to prove its model by delivering Rapid City residents an even better terrestrial radio station than they had before.

"Pandora excels in personalizing discovery and terrestrial radio is experienced in integrating with a local community," Harrison writes. "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." ®

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