Why did Pandora buy a traditional radio station?

Pandora thinks it's getting over-charged to play music under current licensing agreements, so it bought a radio station.

Pandora, the Internet radio service, has over 200 million registered users who listen to the station for 1.31 billion hours per month. So why did the company just buy KXMZ-FM, a small terrestrial radio station in a city of less than 70,000 in South Dakota?

Turns out it's not a move back in time, but a way for Pandora to operate like terrestrial radio. VentureBeat explains Pandora's problem:

Terrestrial radio stations have pretty much free rein on the music they can play, and under current licensing, they don’t get charged a performance licensing fee like digital and satellite music services. Over the last year Pandora has lobbied both Congress and the music industry to lower what the company feels are excessively high licensing fees that are preventing Pandora from turning a significant profit. Thus far, the music industry’s response has been to raise licensing fees for the rest of the radio companies to the same level that Pandora pays.

So Pandora is trying to get around the music industry fees and using its own rules against them by getting into the terrestrial radio business. Christopher Harrison, assistant general counsel at Pandora, explained the move at The Hill:

This acquisition allows us to qualify for the same RMLC license under the same terms as our competitors. 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.

No word what that new FM station will sound like with Pandora in control or if Pandora has plans to buy up more traditional radio stations.

[via VentureBeat, The Hill]

Photo: Flickr/pennstatenews

This post was originally published on Smartplanet.com