Case in point, Internet music streaming service Pandora has bought an FM radio station in South Dakota to reduce its royalty payments:

Pandora is angry about the royalties it’s paying to music publishers, so the company is making a bold move: It’s buying a terrestrial radio station in South Dakota mainly to score lower rates.

The radio station buy is the latest salvo in Pandora’s ongoing legal fight with the performance-rights group American Society of Composers, Authors and Publishers (ASCAP). Pandora says ASCAP discriminates against the company by charging it higher royalty rates, as well as letting publishers pull their song catalogs from Pandora while keeping them available for competitors.

“Certain powerful music incumbents see Internet radio as a threat to the status quo,” Christopher Harrison, Pandora’s assistant general counsel, wrote in a blog post published on The Hill.

To combat that alleged discrimination, Pandora bought the Rapid City, South Dakota, station KXMZ-FM for an undisclosed amount.

Terrestrial radio stations and the Internet properties that own them “were given preferential treatment” through an ASCAP agreement with the Radio Licensing Marketing Committee (RMLC) last year, according Harrison’s blog post.

Pandora says the KXMZ acquisition will let the company qualify for the lower-fee RMLC license. According to Pandora, ClearChannel-owned rival iHeartRadio has such a license because it also owns a terrestrial station.

I’m on Pandora’s side in all this.

Our current IP regime encourages this sort of regulatory arbitrage, and this does little to encourage the production or more music.

All it does is keep record company executives’ brothers-in-law in cocaine.