Fitch Ratings says that the initial spike in costs that Clear Channel should incur per its royalty deal with Big Machine Label Group will likely be offset by long term benefits.
Since Clear Channel is paying nothing for spins of Big Machine tunes over-air, any money paid now will be a new payment. But Fitch believes that moving on-line spins away from the current per-spin rate to a revenue-based rate will allow Clear Channel to begin to take advantage of its online assets. And Fitch believes the benefits may spill over to the entire radio industry.
The current rate paid for airplay to composers, about 3% of revenues, is believed to be higher than the rate Big Machine will collect – speculation is that it is along the lines of the deal earlier being kicked around during the 2010 Performance Rights Act maneuvering, when a 1% fee was on the table.
Fitch says that although this may be a path that Clear Channel makes a standard operating procedure, for the time being it suspects CC will assess how the Big Machine deal works out. Fitch does not expect Clear Channel or any other radio company to start making similar deals with other labels for the time being.
It also believes that the issue could easily re-emerge in Congress.
RBR-TVBR observation: The camel’s nose is definitely under the tent now – the problem is that nobody has any idea what the camel is going to do about it.
Fitch noted that it was making its assessment without knowledge of the deal’s details. And the fact is, nobody has had time to make a full assessment of the impact of this deal. It is likely going to take awhile for the next step in this scenario to develop. All we can say is to stay tuned.
