Rapid City Radio: Pandora Gets Foreign Ownership Waiver

As expected, the FCC Monday moved to allow Pandora Media Inc to exceed the 25 percent cap on foreign ownership in a U.S. broadcaster as the Internet radio company prepares to buy radio station KXMZ FM in Rapid City, South Dakota.

The waiver brings Pandora closer to closing the pending deal, announced in 2013. The streaming service hopes this will allow it to pay lower music royalty fees on par with some of its rivals.

• The FCC gives Pandora Media the foreign-ownership waiver it needs to complete a $600K purchase for South Dakota radio station KXMZ-FM -- and thus lower its royalty bills.

As conditions of the waiver, Reuters reports the FCC requires Pandora to get the agency's approval if the total foreign equity or foreign voting interests exceed 49.99 percent, if its board of directors changes to become mostly foreign or if a foreigner or a group wants to buy more than 5 percent voting or equity interest.

Under U.S. law, foreigners cannot have more than a quarter stake in a broadcast station. Corporate privacy laws complicated Pandora's efforts to prove that its foreign shareholders' stakes did not exceed that threshold.

KXMZ 102.7 FM  (50Kw) Red=Local Coverage Area

Pandora remains in a copyright performance royalty dispute with the American Society of Composers, Authors and Publishers, the music licensing organization. The group objects to the deal and has pushed the FCC to reject Pandora's waiver request.

In a statement on Monday, Pandora said the deal for KXMZ “makes sense to us beyond the licensing parity alone,” adding that it would apply its data on music listening habits to Rapid City, “where over 42,000 residents already use Pandora.” According to Nielsen, the Rapid City market includes 114,000 people age 12 and over.

One of the strongest statements about the dispute came from Ajit Pai, one of the five commissioners of the FCCm according to the NY Times.

In a statement that accompanied the commission’s decision, Mr. Pai said that foreign entities could own majority stakes in cable operators, wireless carriers, “Internet backbone providers” and other major media companies.

“Yet the commission has tied itself (and Pandora) in knots trying to determine whether foreign interests own more than 25 percent of Pandora stock,” Mr. Pai said, “and if so, whether Pandora should be able to own a single FM station in a small South Dakota town.

“This is absurd,” he added.