Pandora Gets Encouraging Sign in its Battle to Lower Rate Payments

Pandora has received an encouraging sign in its struggle to buy KXMZ in Rapid City, S.D.
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SANTA MONICA, Calif.�Pandora has received an encouraging sign in its struggle to buy KXMZ in Rapid City, S.D.

This is a bit of an old story (they�ve been working on buying the station for two years) but, according toBloomberg, �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.�

So what is the significance of this move? It�s really very simple. �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.�

As popular as Pandora is, the company still loses money, in large part because of the rates it is obligated to pay for the music it streams. There is no end to articles that decry the outlook for the company, such as this one fromthestreet.com.

�Pandora is now feeling the stress of high royalty payments that it must pay to artists. This is a result of its inability to monetize its traffic, even though the company commands close to 7 percent of the radio listening market.

�...its popularity is a double-edged sword. The more listeners Pandora attracts, the more it money it must pay to play the music.

�Royalty fees have eaten up a significant portion of potential profit for Pandora, and these fees are expected to grow by an additional 9 percent next year. (Rates are up by 53 percent in the last 5 years.) Accordingly, Pandora's margins have been nowhere to be found, and management has had enough. �Looking to beef up the bottom line, the company has opted to raise the rate of its premium Pandora One platform. �

�It's not just your standard increase. Pandora is jacking prices by 25 percent.�

You can read that entire article, entitled �Pandora just killed itself�here. �

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