Clear Channel will pay second label on-air royalties in exchange for online discount

Clear Channel has now struck a second deal with a record label that trades an on-air royalty for a discount when the label's music is streamed. Clear Channel will pay Glassnote Entertainment a percentage-of-revenue royalty when the broadcaster plays Glassnote recordings on the air or online. 

U.S. broadcasters are not obligated to pay copyright owners to perform sound recordings on AM and FM, but are required to pay when those same recordings are streamed online.

The press release clearly stressed the "market-based" nature of the deal, crafted to "help drive faster growth of digital radio" and create "a sustainable business model for the digital music industry."

Earlier this year, Clear Channel forged a similar arrangement with Big Machine Records. Broadcast group Entercom last week also agreed with Big Machine on such a deal.

With such deals, Clear Channel is likely positioning itself for a future in which (1) more and more of its audience migrates from its broadcast signals to online listening; and (2) broadcast radio's on-air sound recording royalty exemption eventually ends. By taking on the on-air royalty obligation now (under its own terms, and not those of the U.S. Copyright Office), it secures for itself an online royalty structure more tenable than the current CRB-determined statutory deal.

That statutory royalty is exactly the subject of the (recently-renewed) "fairness" debate in digital radio, including the recently-introduced Internet Radio Fairness Act of 2012. To stream copyright sound recordings online, operators pay royalties that amount to a far higher percentage of their revenues than the use of the same music delivered via satellite radio or cable television. Critics say the royalties are so high as to stifle the growth and development of Internet radio, and eventually deny copyright owners and performers royalties they'd earn from a flourishing industry. The Internet Radio Fairness Act is intended to bring Internet radio royalties more in line with those of other forms of digital radio, and has gained the endorsement of the National Association of Broadcasters.  

Clear Channel CEO Bob Pittman was clear that he thinks both his company and the music industry benefit from more affordable streaming rates. "It’s no surprise to us that Glassnote quickly saw this was a great opportunity to help move the digital radio industry towards a more sustainable future. Not only will this agreement expand his label and artists’ participation in all of Clear Channel’s radio revenues; it also creates a vibrant new digital radio business model that we believe will provide more money for the artists and the labels and more digital choices for the consumer."

Glassnote artists include Mumford & Sons (pictured), Phoenix, Two Door Cinema Club, GIVERS, Childish Gambino, and more.