The Pandora Radio takeover of every possible outlet continues on, this time with the purchase of an FM radio station: KXMZ-FM in Rapid City, South Dakota. Although it's a cliche at this point to talk about the slow, agonizing death of analog radio and its outdated approach to entertainment, advertising models, and music, Pandora Radio has a more savvy idea in mind: become more competitive in how it pays for licensing its music for use in online playback. Score one up for streaming online radio.
In an open letter posted on The Hill, Pandora’s assistant general counsel, Christopher Harrison talks about how FM radio doesn't face the same licensing costs as online radio, and FM/online hybrids like iHeartRadio get substantial breaks because of their dual nature.
"Terrestrial broadcasters and their Internet properties were given preferential treatment via a January 2012 agreement between the Radio Licensing Marketing Committee (RMLC) and ASCAP and BMI. To put this in perspective, at least 16 of the top 20 Internet radio services that compete with Pandora operate under the RMLC license that has not been made available to Pandora," he said.
If you can't beat the system, mimic the system. It works in politics and can work in the business world, too. Bill Clinton beat the Republicans by out-republicaning them, and Pandora wants to compete in the ultra-competitive game of streaming music services by gaining advantages that Spotify, Rdio and others don't have (yet).
It should comes as no surprise that this move happens in the same week that Apple announced their iTunes Radio. Apple has a deep relationship with the major recording labels, and part of why it took so long for iTunes Radio to arrive is due to ongoing negotiations that took place between Apple's legal team and industry lawyers. Apple has a deep and evolved relationship that has matured over the years due to iTunes, and is part of why Apple can be so late to the streaming music service game but create a product that can bring in a lot of money for them.
The Internet maxim happens again: innovate or die, and Pandora Radio is doing just that.