It's a small deal right now, but a potentially massive deal for this industry. And the best part is that it doesn't involve Congress, doesn't require the drafting of new laws, doesn't involve a Copyright Tribunal on high, and doesn't involve SoundExchange. Instead, it's a private arrangement between Clear Channel and Big Machine Label Group (Taylor Swift, Tim McGraw, Rascal Flatts) that involves payments for sound recordings, specifically through advertising revenue sharing.
As a quick primer, traditional radio stations already pay royalties to songwriters and publishers. But they have never paid the owners of the recording - except on digital formats, which remain a relative sliver of overall listening. Here are the top-level details, as shared by the companies.
All of which sounds brilliant to those that prefer private, free market solutions, instead of endless bureaucratic and government haggling (and its associated costs.) Always nice to see the kids playing nicely in the sandbox, but Clear Channel isn't a philanthropic organization. Instead, the arrangement prevents a complicated, inflexible decision from legislators or courts, both of whom are - by their nature - distanced from the nuances of these formats.
Perhaps most importantly, it challenges established rates for digital broadcasts, viewed as overly burdensome by established broadcasters and startups alike. The dark side of that workaround, however, is that artists are frequently shorted by their labels -- that that's guaranteed to become an issue if the pilot expands.
- John Hogan, Chairman and Chief Executive Officer of Clear Channel Media and Entertainment.
More at it materializes.
aa Tuesday, June 05, 2012
fantastic. I think the key to this is the following:
"a great incentive to drive the growth of the digital radio industry"
if clear channel doesn't push digital radio, because there are no incentives to do so, it won't grow.
Jeff Robinson Wednesday, June 06, 2012
So every label now has to deal directly with Clear Channel? Good luck if you're a small indie label! lol This is yet another knuckle-headed corporate radio mistake. Why is the NAB so averse to dealing with Soundexchange?
sasebastian Tuesday, June 05, 2012
Awesome news. The label bypasses SoundExchange to take a 50% cut of what belongs 100% to the performing artist.
@marvbarksdale Tuesday, June 05, 2012
what will happen Tuesday, June 05, 2012
Clear Channel will pay the labels who will not pay the artists.
That will eventually force other station owners to pony up, which will drive them out of music formats or the station will have to sell out to Clear Channel.
Meanwhile, some douche will get on here and complain about the $0.002 royalty.
Radio is dead. Nobody really listens to it. The same old payola shit between commercials.
Visitor Tuesday, June 05, 2012
My thoughts exactly. Clear Channel can afford to do this with 1000 stations being programmed by 20 people total. (exaggeration but you get my drift.) Radio operators with less than a dozen stations simply won't be able to absorb the costs of this bookkeeping and cutting checks to hundreds of labels. Small labels will probably see theselves getting cut out of some station playlists simple beccause they don't drive enough revenue for the stations. I see this shaking a few independent radio operators out of the business entirely, and the big operators will be able to snatch up stations on the cheap - a way to get more stations without having to go further into (already unpayable) debt.
What I don't understand is how "percent of revenue" helps profitability for the stations since it is certainly a huge hinderance to operators like Pandora. On the other hand, if Pandora et al can cuts these kinds of deals and leave Sound Exchange out of it, it might help THEIR profitability. Which would help them better compete against the big radio conglomerates.
Can't help but think about the origins of radio - RCA and Columbia were the big operators AND the big record labels. Does this evolve into Big Machine becoming part of Clear Channel and affecting station playlists (terrestrial AND internet)? Anything that takes the government out of it's "unwanted middleman" role is usually a goof thing, but it could turn into an anti-trust investigation and breakup if deals like this turn into exclusivity.
Visitor Tuesday, June 05, 2012
good thing, not "goof" thing.
i fart radio Wednesday, June 06, 2012
Can't help but think about the origins of radio - RCA and Columbia were the big operators AND the big record labels. Does this evolve into Big Machine becoming part of Clear Channel and affecting station playlists (terrestrial AND internet)?
Interesting points here... Since Borchetta comes out of radio promo and that's where he's most at home, i totally think you're onto something... if not a buyout or joint venture, then some exclusive deals perhaps.... i think borchetta is about to re-up with UMG, imminently... so I'm not sure about a CC buyout ... But you never know in this crazy Titanic of a business. Does CC have more money than UMG? radio advertising is definitely up, esp. with the election coming up... hmmm...
Econ Thursday, June 07, 2012
Right now I think the purpose behind this is to lower the costs for iHeartRadio. It'll be interesting to see over the long term how making potentially dozens of deals like this winds up - will it be less hassle to make all those individual deals than it is to deal with Sound Exchange?
It will also be interesting to see how this "percent of revenue" deal works after artists change labels overtime. If, for example, Taylor Swift was to jump to a different label, is this going to lower the value of the deal for one side? Or if, for example, Clear Channel were to buy Pandora?
I fart radio Thursday, June 07, 2012
Specifically how does this lower the cost of I heart radio? I don't see much complexity re artists switching labels. It's the same situation you have now when a label group switches distributors. The old hits stay with the old Distro.
Jeff Robinson Wednesday, June 06, 2012
Clear Channel sold half their stations after the payola Senate Hearings in 2002...still, 600+ stations is a lot of properties and influence nationally.
wallow-T Tuesday, June 05, 2012
I'm just a curious civilian. Reading the Billboard coverage, it seems that the key point for Clear Channel is the shift from fixed-amt-per-play to percent-of-revenue.
Webcasters have been begging for such a shift for years, arguing that under fixed-amt-per-play schedules they were liable for amounts approaching or exceeding total revenue.
If I put on my paranoid hat, I could say that this creates the potential for a favored-supplier situation, in which Clear Channel prefers to program music which costs it less in performance rights. But this is so new and sketchy that it might not be time for the paranoid hat today.
Anon Ymous Tuesday, June 05, 2012
Did BMLG just open up Pandora's box? *Pun not intended. If I'm any independent or major label (or artist for that matter), I'd sure like my piece of the pie... Right now the future of the Performing Right is shrouded in this private agreement.....
And what does this say about neighboring rights now??? The US is one of the select countries in the world without a performance right, which puts us in the company of countries such as Afghanistan, Iran and North Korea. That means that nearly every other country in the world with a performance right has zero duty to pay our artists. All because of a lack of reciprocity. So what has BMLG and CC done here?
Yes, this is a step in the right direction, but let's see some transparency and a little clearer picture of what this means for the rest of the creative community in this country.
paul Tuesday, June 05, 2012
The National Association of Broadcasters (NAB) has offered the following statement on this deal. /pr
"NAB remains steadfastly opposed to a government-mandated performance tax on local radio stations. Beyond our respect for private contracts, we take no position on free-market agreements negotiated between broadcast companies and other businesses."
JOn Wednesday, June 06, 2012
"Performance tax," sheesh.
This doesn't strike me as very promising for artists or indie labels, and there's nothing good - nothing at all - about the news that SoundExchange is being cut out of the picture.
@dhhargis Wednesday, June 06, 2012
@ohheyitserica Wednesday, June 06, 2012
wow never thought I'd see Clear Channel do that. Only tay tay has that power.
Twist and Shute Wednesday, June 06, 2012
What's really in it for CC? Some new twist on payola? Are they going to buy artist deals? Or JV with labels?
Naturally Borchetta, a radio guy to the core, cuts the deal first. Is Azoff playing catchup, or has he been working on this too? Strikes me as a cute way to bring back payola in a big way but with a twist. Under these contracts, a label and artist could perhaps waive the fee for certain windows, say leading up to a big tour.
@syleecia Wednesday, June 06, 2012
PRAISE THE LORD!!!
@ben_cline_esq Wednesday, June 06, 2012
This sounds good in theory but a major collecting more of an artist's monies makes me nervous.
@emayron Wednesday, June 06, 2012
GOOD NEWS!! The world doesn't work if everyone does everything for free!
@musicbiznetwork Thursday, June 07, 2012
From bad to worse...
billeeto Friday, June 08, 2012
Some thoughts on how this helps CC?
This will drive moderately higher costs to CC over the near term, but they hope the switchover to digital radio in the next few years will payoff, because part of the deal is that digital streaming rates will be lower. the payments will be structured as a percent of total advertising revenue, rather than the per-performance basis currently paid on digital streaming.
Here's why it makes sense for CC. compared to what CC has to pay ASCAP/BMI/SESAC (about 3% of local advertising revenue) the negotiated rate for what CC pays to labels under this deal for over the air performance is quite a bit lower. also, the deal reduces the royalties CC pays to BIG MACHINE for its digital streaming. Broadcasters currently pay about $0.002 per performance to SOUNDEXCHANGE for their digital streams. Approximately 2% of CC's listening is digital.
Similar agreements with more record labels would improve the profitability of digital businesses for CC by lowering its costs there. Whether the ability to capture digital audience will translate into incremental revenue will depend on advertising demand and pricing. expect digital to remain only a small portion of total revenue in the medium term.
the risk to CC is that the company will not be able to monetize its digital platform and that the terrestrial payments will result in a longer term net negative to CC. While the previous congressional proposal to impose royalty payments on terrestrial broadcasters died in 2010, such payments are being discussed in Congressional hearings. the deal CC struck with BM is better than any legislation likely would be.. So overall, the deal will increase CC's expenses in the medium term, but the increase will be minimal compared to CC's overall profile, and may be a big savings longterm.
Casey Friday, June 08, 2012
If SoundExchange didn't want so much money this would never have happened. This isn't about pays for terrestrial radio, this is about making internet radio affordable for Clear Channel. Because currently, it isn't. Not even close. Pandora paid 70% of their last quarter revenue to royalties. Clear Channel is losing tons of money on iHeart. Internet radio royalties are too high, even with the pureplay agreement. And when the pureplay agreement ends, the royalties will exceed total revenue. Companies can't function under these rates. This is why Clear Channel struck a deal to lower their internet radio rates, by offering some of their terrestrial radio revenue. This makes sense. If you want someone to blame, blame SoundExchange.
sasebastian Sunday, June 10, 2012
So, as an independent or unsigned artist/songwriter getting spins on radio, we have to cut deals directly to get paid royalties? As if we don't have enough to do writing, recording, marketing, promoting, practicing, performing, touring, sometimes working a day job. Apparently this is OK with a bunch of you. Guess you must not be the creators.