Clear Channel cuts royalty deal with Big Machine


Clear ChannelNashville’s Big Machine Label Group and its artists will be getting checks from Clear Channel tied to airplay on the radio giant’s stations, and in exchange, Big Machine will help Clear Channel develop its digital business.

Terms of the deal were not revealed, but what will happen is those on the music side of the table will have an opportunity to rake in a share of revenue on both the terrestrial and the digital side. Composers have long been compensated for airplay, but it will be an unprecedented payment for the artists. The release does not specify how the label will assist Clear Channel in growing its digital business, but speculation naturally leads in the direction of lower royalty rates than are typically paid for digital spins.

The NAB and the record business were on the path to an agreement for performance royalties, even as the issue was being hotly pursued on Capitol Hill by former House Judiciary Chairman and current Ranking Member John Conyers (D-MI). That deal would have provided for a performance royalty in exchange for music industry assistance in getting an FM chip into cell phones and for lower digital royalty rates. It fell apart due to the difficulty in getting the FM chip portion of the deal on the agenda in Congress.

The deal also comes just ahead of a House Communications Subcommittee hearing which has a witness panel which includes players on both sides of the performance royalty question. The issue was announced as one of the topics to be addressed in the session entitled “The Future of Audio.”

Big Machine’s Scott Borchetta commented, “For years, record companies and media companies have looked for a new way to do business together that would bring our interests into line. In Clear Channel, I found partners who shared my big-picture view of how we could structure an agreement to benefit all involved. Not only does this partnership enable Big Machine to participate in terrestrial broadcast revenues, but we are also helping to grow digital radio – a great opportunity for all of us and a breakthrough opportunity for Big Machine artists.”

Clear Channel’s Bob Pittman added, “Scott Borchetta has reinvented the music business in many important ways over the years, from distribution and artist development to promotion and advertising. Focusing that same creativity on how best to grow the music business, Scott has developed this new model with us to let his labels and artists participate in the revenue of broadcast radio immediately and in digital radio as it builds. This is a big step, but we think this investment is an opportunity worth taking to align our interests in all of our revenue streams and grow digital listening to its full potential with record labels and their artists as our partners. This landmark agreement creates a structure that makes sense for both our companies – but most of all for music fans.”

John Hogan also weighed in, noting that 98% of Clear Channel’s listening is currently over the air. He said the agreement with Big Island is market based, incentivizes growing digital radio and ultimately benefits the listener.

RBR-TVBR observation: When Clear Channel makes a splash, the rest of the industry gets wet. Other radio companies may not like what Clear Channel is doing, but they will likely feel an impact from it nevertheless.

The attempt to create an industry-wide solution to this problem was complex and controversial from the get-go. The backlash against the NAB when it announced it was considering cutting a deal for a performance royalty was furious; to many the mere concept was unthinkable.

Still, NAB President/CEO Gordon Smith has consistently stated that the NAB offer is still on the table and the Association is open to further negotiation.

Is Clear Channel ushering in a new regime which might resemble television’s system of retransmission consent – a free-for-all in which every radio group deals with every label, just as every television group now deals with every MVPD?

We have stated before that the concept of performance royalties is one of the zombie issues on Capitol Hill – it may be beaten back temporarily, but it always rises from the dead and makes another appearance. Will the 6/6/12 House hearing revive it again?

Will the combination of the Clear Channel/Big Machine deal and the revival of the issue on Capitol Hill combined with the apparently growing legislative will to add FM chips to cell phones and in turn lead to a revival of talks between NAB and RIAA?

Stay tuned.