Pandora Said to Win a Nod Toward Buying KXMZ-FM in South Dakota

Internet radio pioneer Pandora Media Inc.’s efforts to buy a South Dakota radio station in order to pay lower music royalties is advancing before U.S. regulators.

Federal Communications Commission Chairman Tom Wheeler asked fellow agency members to give Pandora a waiver it sought of a foreign ownership rule, said two agency officials who requested anonymity because his recommendation isn’t public.

The FCC action would clear the way for Pandora to acquire KXMZ’s license, and its application remains pending, one of the officials said.

Buying KXMZ-FM in Rapid City qualifies Pandora for rights and prices enjoyed by over-the-air competitors such as Clear Channel Communications Inc., CBS Corp. and Cumulus Media Inc., the company said as it announced the purchase in 2013.

“This move makes sense to us beyond the licensing parity alone,” said Dave Grimaldi, a Pandora director. “We are excited to apply Pandora’s insights about listening habits to music programming that will reflect local listeners’ evolving tastes.”

Pandora is trying to pry advertising dollars and customers away from traditional radio fast enough to pay for rising royalty costs for songs. Congress is contemplating bills that could increase how much Internet radio pays for the music it plays.

Pandora pays agencies such as the American Society of Composers, Authors and Publishers, or ASCAP, and Broadcast Music Inc., which represent rights holders such as songwriters and composers, to use songs for its service.

‘A Loophole’

By buying KXMZ, Pandora is trying to create “a loophole,” said Richard Reimer, senior vice president with ASCAP. Pandora would pay lower rates designed for online services of radio stations, Reimer said.

Pandora said it’s within the FCC’s 25 percent foreign ownership limit, but can’t show compliance because privacy rules mask the identities and nationalities of shareholders, according to the FCC. The company based in Oakland, California, asked the FCC to let foreign investors hold as much as 49.99 percent voting interest and 100 percent equity interest.

Wheeler told broadcasters April 15 the agency is exploring whether to ease limits on foreign ownership of U.S. broadcasters, potentially boosting investment.

The foreign-ownership issue has “entangled” Pandora’s application for the KXMZ license, FCC Commissioner Michael O’Rielly said in a blog post last month.

Pandora has paid $400,000 of the $600,000 purchase price of the station, according to a Feb. 11 regulatory filing.

KXMZ plays “today’s best hits without the rap,” according to its website.

Mark Wigfield, an FCC spokesman, declined to comment.

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