Radio and label groups react to Clear Channel licensing pact with Warner

Yesterday the nation’s largest radio broadcaster announced a deal with one of the big-three label groups to pay for the on-air use of sound recordings (see our coverage here). The Clear Channel/Warner Music Group agreement isn’t the first, but it’s the largest so far, and the first involving a major label group.

Performers and copyright owners have long fought for compensation for the use of their work by broadcast radio. On the other hand, it’s pretty clear that the biggest obstacle to the growth of Internet radio has been this very compensation, which online and satellite operators do pay. So, one interpretation of the deal is that it’s a start towards bringing this situation into equilibrium.

When Clear Channel Media Holdings CEO Bob Pittman began making these deals with independent labels and label groups like Big Machine, some observers felt it was actually simply a ploy to turn down the heat from Congress, as more and more lawmakers clamored to make on-air performance rights a law. But with a royalty pact with as significant a player as Warner, some feel perhaps Pittman is indeed fully committing to a digital future for radio. Pittman himself said this deal (and the previous indie deals) are about building a successful digital broadcast business — which isn’t possible under the current royalty structure.

The actual terms of the WMG agreement aren’t public. Thirty Tigers’ David Macias writes he’s heard press rumors of 1% of advertising revenue for on-air plays, 3% for digital plays. Billboard sources say the earlier indie deals were for 1% of terrestrial/2% of digital — terms all three majors, including WMG, turned down (Economist David Touve has some “back of the napkin” calculations of “the value of a radio performance” based on these numbers here). The Wall Street Journal Corporate Intelligence blog says whatever the percentages, “Clear Channel will pay Warner Music close to $50 million over the next three years… including a portion of that upfront.”

Entercom, a broadcast competitor to Clear Channel, has made on-air/online royalty deals with independents as well. Entercom President and CEO David Field applauded Pittman’s agreement as “smart, bold and visionary,” calling it “another important step forward in establishing a new business model that aligns the interests of artists, labels, consumers and broadcast radio.” [Programming note: David Field will keynote Tuesday’s RAIN Summit Orlando, more here]

The RIAA, which represents major and some indie labels, seems more skeptical. “It’s important to understand that there is no substitute for actual legislation establishing a legal performance right,” spokesman Jonathan Lamy said.

Another music industry lobby, MusicFirst Coalition, called on Clear Channel to break with the National Association of Broadcasters and its opposition to a federal law estabishing a broadcast right for sound recordings. “Unfortunately, Clear Channel and (the NAB) have been the principal roadblocks to ending the loophole that allows AM/FM broadcast radio alone to take music without paying artists or labels,” said executive director Ted Kalo.

David Macias, co-founder of indie label Thirty Tigers, wrote in an op-ed in Hypebot that he’s worried deals like yesterday’s may simply make it even harder for independent artists and labels to get on the air. He worries over “a future where the exposure via public airwaves and public bandwidth for music will be in large part governed by the financial relationships between media companies and larger content providers. This will have a chilling effect on the independent music community from a business standpoint and will increase the likelihood that most of the music that you will hear on the public’s airwaves will be music that a corporation feels can be commoditized.”

Like the RIAA and MusicFirst, he feels a “compulsory license” — where broadcasters could license any music simply by paying an industry-wide mandated rate — is a better solution. He also brings up the fact that “direct deals” like this circumvent the legal requirement that copyright owners split royalties with performers 50/50.

“Hey artists. So when those payments for non-interactive radio streaming start going to your label through negotiated deals that you’re not a party to because you don’t own your master, rather than going through Sound Exchange, what percentage of those payments do you think you’re going to get? You should call your label now and ask,” Macias wrote.

We’re looking forward to analyzing this deal further, when/if its terms leak…

Read more in Billboard here, Touve’s Rockonomic here, Corporate Intelligence here, and Hypebot here.

Paul Maloney