Clear Channel Communications has opted for share revenues from standard radio broadcasts with all the record label behind Taylor Swift, a move that deviates in the traditional economics of the radio industry.
The sale is a departure from the way broadcast companies have traditionally done business with record labels; performers and labels currently don't collect royalty payments when their songs are played on standard over-the-air radio. In accordance with federal law, broadcasters should pay only the composers and publishers from the song.
The deal announced Tuesday hands Big Machine, which also represents country stars like Tim McGraw and Rascal Flatts, an undisclosed part of Clear Channel's revenue, an amount for the way many times a broadcaster plays songs by the label's acts.
If the agreement makes its presence felt throughout the industry, it would give performers and music business access to an income stream they've got long coveted. In return, broadcasters like Clear Channel, which streams music on 850 radio stations as well as through its iHeartRadio app, could lower your expenses in the growing and unpredictable arena of Internet radio.
Unlike for traditional radio broadcasters, Internet radio broadcasters already pay music business and performers when a song is played. For instance, Pandora pays 0.11 cents to labels and artists whenever a song is streamed on its service, grounds many broadcasters have refrained from buying online broadcasting. Last year Pandora paid 54 percent of the revenue in royalties.
Through its take care of Big Machine, Clear Channel can limit the royalty payments because of its online streams.
Robert W. Pittman, Clear Channel's leader, said in an interview how the royalty structure behind online radio had stunted the expansion of the medium. He added that deals similar to this could help the Internet radio industry grow.
"If you look at the radio business, the thing is people who are slow to embrace digital," Mr. Pittman said."We would like to the future and trying to align ourselves with the music industry and not working at cross-purposes," Mr. Pittman said.
Mr. Pittman declined to touch upon whether Clear Channel had deals inside the works with other labels.
The problem of record label and performer royalties for terrestrial radio has become debated for decades. The record industry has lobbied Congress to change the law, while broadcasters have typically opposed the idea of paying more royalties for terrestrial radio broadcasts. Before a potential deal between the National Association of Broadcasters and a group representing record labels regarding terrestrial radio royalties fell apart almost couple of years ago, the association campaigned against additional royalties.
On Tuesday, the audience issued a statement that avoided reply to Clear Channel's deal. However, the group issued a statement saying that it remained "steadfastly against a government-mandated tax on local stereo."
"Beyond our respect for private contracts, we take no position on free-market agreements negotiated between broadcast companies and other businesses," the statement said.
Robert Unmacht, an editor at the online trade publication Radio-Info.com, said Clear Channel's deal might make it more difficult for broadcasters to oppose such royalties in the foreseeable future.
"It does break the ice, and it puts them just a little ahead of setting terms," Mr. Unmacht said.
Scott Borchetta, the founder and us president of Big Machine, said in an interview that the deal allowed both companies to possess some predictability in a time of big changes to the music industry.
"We want to say, 'this is coming,' and now we want to be ready for it as it pertains," Mr. Borchetta said.
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