Alien ownership conditions imposed on Internet radio service when it tries to buy small-town radio station
This is the story of how Pandora, in an effort to cut its copyright royalty costs, managed to saddle itself with a complex array of ownership reporting requirements designed by the FCC to keep Box Elder, South Dakota safe from aliens. It’s a true story.
Pandora, of course, is the prominent Internet music streaming operator. Since its business consists of transmitting recorded music digitally, it’s on the hook for a lot of copyright royalties payable, through ASCAP, BMI and SESAC, to the composers of the music it transmits. The precise rates it pays are generally subject to direct negotiation between Pandora and the performance rights organizations (PROs).
In contrast to Pandora and other streaming services that are limited exclusively to Internet distribution, radio broadcasters do not have to negotiate individually with respect to royalties. Rather, broadcasters’ rates are set industry-wide through negotiations between, on the one hand, the Radio Music License Committee (RMLC) acting on behalf of broadcasters and, on the other, the various PROs. (The federal courts are also involved in the process to a degree.) Those negotiations have been good for traditional over-the-air broadcasters, who as a result pay lower royalties for their own digital transmissions than do Pandora and other Internet-only services. And those lower rates apply even if the broadcaster’s stream(s) carry content other than what the broadcaster is sending over-the-air.
Pandora has been involved in acrimonious negotiations, and even litigation, with ASCAP regarding its royalty rates. But then it had an idea: why not take advantage of the attractive over-the-air broadcaster rates by simply becoming a broadcaster?
And so it was that Pandora came to Box Elder (pop. 7,800), where the only local radio station in town was for sale.Continue Reading...