Pandora Looks to Benefit from FCC’s Univision Clearance.
On the heels of this week’s Federal Communications Commission decision giving Univision Communications clearance to sell more of the company’s equity to foreign entities, one of Pandora’s offshore investors is seeking permission to raise its stake in the webcaster. Matrix Capital Management wants to raise its position to 14.99%, up from its current 9.88% interest. The move requires FCC approval because of Pandora’s ownership of CHR “Mix 102” KXMZ in Rapid City, SD.
The request comes as the FCC rapidly evolves from the government’s decades-old resistance to foreign investment dollars flowing into media. The Commission previously cleared Pandora to exceed the 25% foreign ownership cap but as part of that May 2015 waiver it said any individual investor could hold up to a 5% stake, and any institutional investor such as Matrix would be capped at a 10% stake. By greenlighting Univision to sell up to a 40% stake to a single entity, it may signal the FCC could be willing to allow Pandora to go further than its current limit.
The move, if approved, would also push Pandora beyond the 49.99% foreign ownership limit set earlier by the FCC. But in its petition, Matrix points out that although it is based in the Cayman Islands, the hedge fund primarily invests in U.S. securities and is controlled by David Goel, who holds both U.S. and Canadian citizenship. Six of the other partners in Matrix are also U.S. citizens. In its request, Matrix says it will be a non-controlling minority shareholder “that will not have the ability to significantly influence the management or operations of Pandora FM—nor will it raise any concerns related to national security, law enforcement, foreign policy or trade policy.” It goes on to say that being allowed to increase its investment in Pandora fits into the Commission’s goal of facilitating investment in the broadcast industry.
The FCC has created a rulemaking (MB Docket No. 16-418) on the proposal and is taking its initial round of comments through Jan. 23. Reply comments will be due Feb. 7.
In September the FCC adopted new regulations that while maintaining the current 25% ownership cap on radio and television for foreign investors, also created a standardized waiver system to allow operators to go offshore. The FCC now allows a publicly traded U.S. company that owns radio or TV station licenses to seek approval to have as much as 100% of its stock held by unnamed foreign owners. Offshore investors are also able to hold up to 49.99% of a company’s equity with agency clearance. The catch is a majority of ownership and control must still reside in the hands of an American entity and board of directors.
In bringing the proposal to a vote, FCC chair Tom Wheeler specifically pointed to Pandora’s purchase of KXMZ as the eye-opener for the agency. “Our experience with the Pandora review illustrated the need for greater clarity and certainty for both broadcasters and investors during the review process,” Wheeler said.
Pandora bought KXMZ in an attempt to pay the same royalty rate as AM/FM radio. But the company now says it has no plans to sell the station even though the idea didn’t work out. “We have no current plan to sell the business,” Pandora general counsel Steve Bene said in an interview with C-Span last month. He said that dipping its toe into over-the-air radio has been an “interesting experiment” for the webcaster. “I don’t know if we are interested in broadening that experiment, but they are part of the Pandora family and we like having them,” Bene said.
Since owning an over-the-air station, Pandora has been required to change the company’s charter and alter the way it tracks who owns its publicly traded stock to help ensure it complies with the FCC’s foreign ownership limits. On the programming front, Pandora has created four Rapid City-targeted Pandora streaming stations including Rapid City Rocks Hard, Hits Country, Hits Classics and Classic Country Hits, to leverage its KXMZ ownership. The company says that’s given it the ability to consider what Rapid City Pandora users are giving a thumbs-up to.
“This also allows us to be very current with local listener preferences, rather than relying on old information,” a post on KXMZ’s website said. It also uses thumbs-up and spin data from its online channels to program a top-five song countdown on KXMZ in afternoon drive.
Your Editor Predicts: The FCC surprise decision on Univision will open new and unexpected opportunities.
