We know from previous industry experience that buying and selling radio stations is a long drawn out process. However, Pandora has picked a very opportune time to announce that they’re buying a terrestrial radio station in South Dakota.
This news comes fresh off the heels of the announcement from Apple about iTunes Radio. One of the things that was touted during and after the WWDC keynote on Monday was the fact that Apple has negotiated some great licensing rates with the major record labels. Licensing is one of the things that’s been plaguing Pandora and making it an extremely tough market for them.
We’ve learned from multiple sources, including radio industry trade site allaccess.com that Pandora is in the process of buying HOT AC, Hits 102.7 KXMZ in Elder-Rapid City South Dakota from Connoisseur Media.
The executives at Pandora didn’t just up and decide to buy a “real” broadcast radio station for fun, or to see how it was done in the “old days”, rather this is a very strategic business move for the internet radio giant. Pandora is purchasing the radio station so that they can get lower licensing rates, the rates that terrestrial broadcast stations get, for streaming. It’s these lower rates that make it possible for Clear Channel Media and Entertainment to offer so much with their iHeartRadio platform.
San Antonio based Clear Channel owns over 500 stations nationwide and broadcasts most of them via their iHearRadio app. Pandora’s General Counsel, Christopher Harrison, took to an op-ed piece in The Hill to explain their move and how they are treated unfairly, specifically in regard to iHeartRadio.
Pandora has filed a motion in it’s legal proceedings against ASCAP alleging “discriminatory treatment of PANDORA and other Internet radio companies by ASCAP and their publishing industry members”
The radio station that Pandora purchased currently plays a Hot Adult Contemporary (Hot AC) format which is a mix of top 40 hits and familiar favorites. It’s unclear what direction Pandora will take with the format of the station, but one industry executive we spoke to suggested that Pandora will have to play a “we play everything” format in order to take full advantage of the loophole they’ve climbed through with the purchase of the radio station.
It’s also unclear as to whether or not Pandora will purchase more traditional radio stations. Harrison said in regards to the purchase: “This acquisition allows us to qualify for the same RMLC license under the same terms as our competitors,” adds HARRISON. “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.”
So is this move in response to iTunes Radio?