Clear Channel, the largest owner of radio stations in the U.S., has agreed to pay Big Machine Label Group performance royalties for the use of sound recordings on AM/FM in exchange for more advantageous digital royalty rates. Essentially, Clear Channel will pay the label an undisclosed percentage of music advertising revenue for all broadcasts -- digital and terrestrial. That enables Clear Channel to avoid SoundExchange and the per-song, per-listener royalty rate.
Clear Channel CEO Bob Pittman says that's the advantage of the deal. "I can't build a business space based on paying money for every time I play a song," he said, "but I can build a business by saying I will give a percentage of revenue that I bring in... What we are really trying to do is come up with a predictable model." Clear Channels hopes to make more direct deals with labels this year, but Pittman says they'll need to wait and see if the deal with Big Machine works out economically first. "Starting small is the way to do it because it will have less of an impact."
Said John Hogan, Chairman and CEO of Clear Channel Media and Entertainment: "Today, 98% of our listening is terrestrial broadcast and 2% digital -- with record labels and artists only paid for the 2%. This new agreement expands label and artist participation from just digital to terrestrial broadcast radio revenues in one comprehensive framework that will give all of us a great incentive to drive the growth of the digital radio industry and allow everyone to participate financially in its growth. This market-based solution helps bring the best in music to radio listeners wherever they want to hear it."
Radio-Info calls the deal "a potential game-changing revenue deal to fuel digital radio's growth." Billboard dubs the partnership "unprecedented."
Big Machine Label Group includes artists like Taylor Swift, Tim McGraw, Rascal Flatts, Edens Edge, Ella Mae Bowen, Reba McEntire and others. "Now, we can align our interest with radio in a predictable model based on ad revenue so that we can drive digital growth," commented the label's president and CEO Scott Borchetta. "When stations tell me that they can't afford to broadcast digitally, what good does that do me?"
Clear Channel has also launched a new channel on iHeartRadio: Big Machine Radio. It will feature music from the label's artists, plus interviews, rare recordings and a weekly "From the Vaults" feature (including archived radio specials from artists' early days). Find more info about the new channel from Clear Channel here.
What kind of impact will this deal have on the industry at large? "If Clear Channel turns to other indie labels and offers the same deal, it could be setting a market rate precedent for the day, should it ever come, when such a sound-performance rate is legislatively enacted," comments Billboard. "Also, if Clear Channel sticks to dealing with indies, the company could set a rate precedent without dealing with the major labels, which tend to ask for big advances and aggressive rates."
"Because of its sheer size, everything Clear Channel does affects other groups," writes Radio-Info's Tom Taylor. "There could be howls."