What does the Clear Channel and Warner Music Group Deal Mean For the Music Industry?

Clear Channel and Warner Music Group have partnered up bringing up issues of royalties paid to artist for radio plays. Royalties are fees paid to artists and labels for use of their product: the songs that play on the radio. Typically radio stations are only required to pay royalties for songs played on the web, not through typical radio broadcasts. The broadcast industry has long been against the practice that occurs everywhere besides the US. Digital broadcasts pay royalties at a rate of $0.0022 per son based on the per play rate per listener. This results in very unpredictable costs for the digital broadcast companies.

This new partnership is ground breaking because it is the first time that a broadcast company is paying a big name label royalties. Clear Channel CEO Bob Pittman sees deals, like the one with Warner Music Group, as the answer to the unpredictable cost problem. Pittman has made deals with smaller indie labels, which other radio networks like Entercom Communications and Beasley Broadcast Group have followed suit with.

The deal between Clear Channel and Warner Music Group pays  1% of advertising radio from typical radio broadcast labeled “artist performance royalties” and 2% for digital webcasting. This is equivalent to the statutory rate for webcast broadcasts, like iheartradio, already statutorily in effect. Pittman says that these deals allow for a more predictable business model than the statutory requirements, which allows radio companies to grow with the times.

Some from the radio broadcast community are upset about giving in to these royalties after years of fighting legislation for royalties like these. Others in the broadcasting industry argue that what Pittman is doing is smart. They see Pittman’s approach as paying lip service to the royalties will keeping them low and on the radio broadcast communities’ terms.

The difference with the Warner Music Group deal compared to Pittman’s earlier deals is that this is a major label company that in the past rejected deals like those Pittman cut with the indie labels. The questions now become will Pittman and Clear Channel cut more deals? Will other broadcasters follow Pittman’s lead?

Pittman sees this deal as the future of radio broadcasting. Pittman says that the digital age makes it necessary for music and media entertainment companies to work together to meet both of their needs. Indeed the partnership  exemplifies Pittman’s vision with new promotional opportunities for Warner Music Group through Clear Channel programs.

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