Clear Channel Announces Revenue Sharing Agreement With Big Machine
June 5, 2012
Clear Channel Media and Entertainment and Big Machine Label Group have announced "a groundbreaking agreement to align their business interests and accelerate growth and innovation in digital radio to the benefit of music fans and radio listeners everywhere." Through this arrangement, Big Machine will become the first record company to directly participate, along with its artists, in Clear Channel’s terrestrial broadcast radio revenues. Big Machine is the label home of Taylor Swift, as well as Tim McGraw, Rascal Flatts and many other Country acts.
According to Billboard.biz, this agreement will pay out sound-recording performance royalties to Big Machine directly. The artist performance royalty issue has been a sticking point between labels and radio for years, and currently is only paid out for streaming radio, but not over-the-air. As part of this arrangement, CCME will pay an undisclosed percentage of its broadcast music ad revenue, for both terrestrial and Internet radio, to Big Machine. This agreement also bypasses SoundExchange and goes directly to Big Machine, which will split the money between the company and its artists.
"For years, record companies and media companies have looked for a new way to do business together that would bring our interests into line," stated Scott Borchetta, President/CEO of Big Machine Label Group. "In Clear Channel, I found partners who shared my big-picture view of how we could structure an agreement to benefit all involved. Not only does this partnership enable Big Machine to participate in terrestrial broadcast revenues, but we are also helping to grow digital radio – a great opportunity for all of us and a breakthrough opportunity for Big Machine artists."
"Scott Borchetta has reinvented the music business in many important ways over the years, from distribution and artist development to promotion and advertising," said Bob Pittman, Clear Channel CEO. "Focusing that same creativity on how best to grow the music business, Scott has developed this new model with us to let his labels and artists participate in the revenue of broadcast radio immediately and in digital radio as it builds. This is a big step, but we think this investment is an opportunity worth taking to align our interests in all of our revenue streams and grow digital listening to its full potential with record labels and their artists as our partners. This landmark agreement creates a structure that makes sense for both our companies – but most of all for music fans."
"Today, 98 percent of our listening is terrestrial broadcast and 2 percent digital – with record labels and artists only paid for the 2 percent," adds CCME Chairman/CEO John Hogan. "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."
Additionally, in an internal letter, CCME President of National Programming Platforms Tom Poleman wrote, "In this agreement, label and artist compensation will now also be connected to our terrestrial broadcast revenue, similar to the way we pay songwriters through ASCAP, BMI and SESAC. While Big Machine represents a small percentage of the total music we play, this move is historic because it introduces a completely new structural model for our businesses."
"Why the change? Because it's good for the long-term health of the music and radio industries. For digital radio to grow, it's critical to have a predictable, sustainable pay structure that aligns radio, label and artist interests. And we're excited that Scott Borchetta and his team at Big Machine were willing to work with us on a revolutionary approach. Scott is a visionary who built Big Machine and career artists like Taylor Swift from scratch in less than 10 years by doing things differently and not being afraid of change."
He continued, "It's a bold move. And, yes, it will cost us more money in the short term and possibly even in the long run. But we believe that this is a risk worth taking to ensure a healthy future for both our business and the music industry. Under this new, aligned structure, radio, labels and artists now all stand to make more money as we drive the growth of digital radio. Our interests will be linked. As we make money, labels and artists make money."
"We will certainly discuss similar agreements with other labels. Because of the expense, we may not be able to partner with everyone until we see results from accelerated digital growth to offset the cost of sharing our broadcast radio revenue. But these are the kind of risks we have to take to be an innovator and fundamentally change our industry."
NAB EVP of Communications Dennis Wharton commented, "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."