Digital Music News reports CC rumored to be paying small label partners "1% of revenue" as on-air royalty

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Issue Date: 
May 6 2013 - 1:00pm

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Digital Music News today revisits the topic of radio broadcast groups forging licensing deals with small record companies that effectively discount streaming fees for a small revenue share for on-air play.

Clear Channel is the largest radio operator engaged in these deals, with label groups like Big Machine, Glassnote, and more. Other broadcasters with similar deals include Entercom and Beasley.

While the terms of these deals aren't public, Digital Music News writes, "In return for getting royalties for airplay, rumoured to be around 1% of revenue, the labels agree to bypass SoundExchange and so cut their online royalty rates to what's rumoured to be around 3% of revenue." [Most AM/FM radio stations pay nothing to use sound recordings on-air. This year most broadcasters will pay $0.0022 per song, per listener for songs streamed online. See more in our royalties round-up under "Commercial Broadcasters" here.]

If it's true radio sees the end of free broadcast use of sound recordings coming, broadcasters might be trying to stay ahead of government regulators by voluntarily entering deals, rather than waiting for the Copyright Royalty Board to set a less favorable rate (see "Internet radio"), as the article suggests.

"The reason (Clear Channel would agree to these terms) must be to drive down the overall royalty rates it has to pay," Digital Music News reasons.

After the news source gets its customary digs against Pandora and Clear Channel in, it points out that while these deals do give recording copyright owners (labels) a bit of a royalty for on-air play (for which they're legally entitled to nothing under current U.S. law), they may not be ideal for performers. For one, there's no guarantee of a consistent rate from deal-to-deal.

And record companies have an extra incentive to forge these agreements: unlike SoundExchange payments, labels aren't legally required to share them with performers.

Industry legal expert David Oxenford has some excellent analysis of these deals in Broadcast Law Blog here.

Read more in Digital Music News here.

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