RAIN 6/5: In "potentially game-changing" deal, Clear Channel to pay AM/FM performance royalties to label in exchange for break on digital

Michael Schmitt
June 5, 2012 - 11:35am

Clear ChannelClear Channel, the largest owner of radio stations in the U.S., has agreed to pay Big Machine Label Group performance royalties for the use of sound recordings on AM/FM in exchange for more advantageous digital royalty rates. Essentially, Clear Channel will pay the label an undisclosed percentage of music advertising revenue for all broadcasts -- digital and terrestrial. That enables Clear Channel to avoid SoundExchange and the per-song, per-listener royalty rate.

Clear Channel CEO Bob Pittman says that's the advantage of the deal. "I can't build a business space based on paying money for every time I play a song," he said, "but I can build a business by saying I will give a percentage of revenue that I bring in... What we are really trying to do is come up with a predictable model." Clear Channels hopes to make more direct deals with labels this year, but Pittman says they'll need to wait and see if the deal with Big Machine works out economically first. "Starting small is the way to do it because it will have less of an impact."

Said John Hogan, Chairman and CEO of Clear Channel Media and Entertainment: "Today, 98% of our listening is terrestrial broadcast and 2% digital -- with record labels and artists only paid for the 2%. This new agreement expands label and artist participation from just digital to terrestrial broadcast radio revenues in one comprehensive framework that will give all of us a great incentive to drive the growth of the digital radio industry and allow everyone to participate financially in its growth. This market-based solution helps bring the best in music to radio listeners wherever they want to hear it."

Radio-Info calls the deal "a potential game-changing revenue deal to fuel digital radio's growth." Billboard dubs the partnership "unprecedented."

Big Machine Label Group includes artists like Taylor Swift, Tim McGraw, Rascal Flatts, Edens Edge, Ella Mae Bowen, Reba McEntire and others. "Now, we can align our interest with radio in a predictable model based on ad revenue so that we can drive digital growth," commented the label's president and CEO Scott Borchetta. "When stations tell me that they can't afford to broadcast digitally, what good does that do me?"

iHeartRadioClear Channel has also launched a new channel on iHeartRadio: Big Machine Radio. It will feature music from the label's artists, plus interviews, rare recordings and a weekly "From the Vaults" feature (including archived radio specials from artists' early days). Find more info about the new channel from Clear Channel here.

What kind of impact will this deal have on the industry at large? "If Clear Channel turns to other indie labels and offers the same deal, it could be setting a market rate precedent for the day, should it ever come, when such a sound-performance rate is legislatively enacted," comments Billboard. "Also, if Clear Channel sticks to dealing with indies, the company could set a rate precedent without dealing with the major labels, which tend to ask for big advances and aggressive rates."

"Because of its sheer size, everything Clear Channel does affects other groups," writes Radio-Info's Tom Taylor. "There could be howls."

You can find the companies' press release here and further coverage from Billboard here and Radio-Info here.

Michael Schmitt
June 5, 2012 - 11:35am

CongressThe U.S. House of Representatives Subcommittee on Communications and Technology will hold a hearing tomorrow on "The Future of Audio." Witnesses to testify include Pandora founder and Chief Strategy Officer Tim Westergren, along with representatives from the Consumer Electronics Association (CEA), CTIA, RIAA, NAB and others.

The hearing will take place tomorrow at 10:15AM Eastern.

Westergren's testimony will focus on the "severe and fundamental problem" facing Internet radio. "We are subject to an astonishingly disproportionate royalty burden compared to these other formats [AM/FM radio and satellite radio]," his written statement says. "The inequity arises from the fact that Congress has made decisions about radio and copyright law in a piecemeal and isolated manner... It is time for Congress to level the playing field and to approach radio royalties in a technology neutral manner."

Gary Shapiro, President and CEO of the CEA, will offer a similar argument: "No one source should be given preferential treatment over all others. For this reason alone, we do not agree that Congress should take any action favoring broadcast radio over any other source of audio."

Cary Sherman, Chairman and CEO of the RIAA, will also argue that broadcasters pay a performance royalty.

Arguing against platform parity will be Steven W. Newberry, President/CEO of the Commonwelath Broadcasting Corp., speaking on behalf of the NAB. He will argue broadcast radio should continue to be exempt from paying performance royalties because of its impact on local communities and other government regulations it must adhere to, but from which webcasters are exempt.

Jeff Smulyan, Chairman, President, and CEO of Emmis Communications will testify in favor of regulation that puts FM chips in cellphones. CTIA VP Christopher Guttman-McCabe will argue that instead of regulation, FM chips in cellphones "should be driven by consumer preference." He will also request a "light touch" from Congress when it comes to other matters, like spectrum.

Other witnesses to testify include Ben Allison, the Governor of the New York Chapter of the National Academy of Recording Arts and Sciences and David M. Israelite, President/CEO of the National Music Publishers' Association.

You can find more information about the hearing here.

Paul Maloney
June 5, 2012 - 11:35am

Microsoft has announced Xbox Music, a 30 million track music service for the Xbox 360 entertainment console, Windows Phone, and Windows 8. The service is scheduled to launch in fall.

The new service will feature a music download store, music subscription, artist-based radio, and a "cross-screen client" for users to access their personal music collections.

Relatedly, Microsoft has also quietly pulled the plug on its disappointing Zune music platform (the Zune device had been discontinued some time ago).

Regarding compatibility, Ars Technica reports a Gartner analyst says the service will actually also run on iOS and Android, though details regarding Microsoft support for those platforms isn't available.

Read more on Xbox Music in Ars Technica here and in Engadget here. Read more about Zune in The New York Times here. (photo from Engadget)

Paul Maloney
June 5, 2012 - 11:35am

Social Radio, which designs software for radio designed to improve online engagement, has unveiled a new player design and interactive software demo.

Steve Allaway, Social Radio CEO, said, "The Social Radio platform is the first of its kind to blend what listeners truly love about radio, the great content and local personalities that connect with them, with the kind of choice, control and personalization that is native to online and mobile media consumers."

Social Radio offers broadcasters "SoundExchange compliant" streaming with features like "Personalized Local Radio, Listener Choice and Control, Song Skipping, Song Rating, Sharing Radio to Facebook, Advertising Accountability, Targeted Advertising for Radio, Multiple Channels for Online Radio Stations, Social Radio Listener Experience, Social Radio Advertiser Experience, and more."

The new demo is available here. Read Social Radio's entire press release here