Pandora Buys FM Station, Aiming to Lower Royalty Rates

Internet radio giant Pandora Media made a deal to buy KXMZ-FM, a tiny terrestrial radio station in Rapid City (SD), in order to qualify to pay lower royalty rates to music publishers.

IHeartRadio, a nascent competitor to Pandora owned by Clear Channel Communications, already pays the lower rate, thanks to the parent company's vast network of 800 radio stations. Pandora believes owning even a single station will entitle the company to pay lower royalties for certain rights, saving it nearly 1% of revenue. Pandora's revenue in the most recent financial quarter totaled $70.6 million. KXMZ, previously owned by Connoisseur Media LLC, was the cheapest station Pandora could find, said company spokeswoman Mollie Starr, who didn't disclose the price. The station plays "adult contemporary" music by artists like Justin Timberlake and Bruno Mars and had an average listenership of 18,000 as of early last year, the most recent data available.