Royalty Deal A First

Big Machine Records, Taylor Swift’s record label, and Clear Channel Radio have cut a groundbreaking deal that establishes a first-time performance royalty for recordings played on traditional radio and paves the way for the growth of online radio. And other artists, including Don Henley, are looking to follow suit.

Under the deal, Big Machine artists including Swift, Rascal Flatts and Tim McGraw will receive immediate payment for songs played on Clear Channel stations. Until now, royalties were paid only to songwriters and music publishers who represent them.

Irving Azoff, Live Nation Entertainment chairman and manager of artists including Henley, is also a Clear Channel director. He told Bloomberg News that the revenue-sharing deal could be a model for the rest of the industry.

“We’re trying to convince labels to enter into a direct deal because we can’t get legislation passed,” Azoff told Bloomberg.

Henley, Sheryl Crow and other leading artists have long advocated for a restructuring of royalties to include payment to artists who perform songs played on radio. Their efforts have been resisted by radio broadcasters, including the powerful National Association of Broadcasters, which has lobbied heavily against performance royalties.

With the advent of the Internet and online broadcasting, revenue streams for recording artists have crumbled as traditional radio and record sales have crumbled. Clear Channel, with more than 850 radio stations (down from a high of more than 1,200), also streams online through its I Heart Radio smartphone application.

Royalties are currently paid at the rate of fractions of a cent per play by online broadcasters and satellite radio. On-demand services such as Pandora and Spotify individually negotiate licensing terms with record companies.
With the new deal, Clear Channel is able to limit royalty payments for online streaming, according to the New York Times. Clear Channel CEO Robert Pittman told the paper that the existing structure had stunted the growth of online radio.

“If you look at the radio business, you see people who are slow to embrace digital,” Pittman told the Times. “We are looking to the future and trying to align ourselves with the music industry and not working at cross-purposes,” he said.
In addition to Henley, Azoff represents other members of Eagles, Christina Aguilera, Neil Diamond, Van Halen and Steely Dan, of which could benefit from a agreement similar to that made by Big Machine. And the establishment of “more realistic” digital royalty rates helps expand online radio, Azoff told Bloomberg.

“Unrealistic rates on the digital side were choking the ability to expand digitally for radio companies” and “holding back consumers. We learned from Napster, that’s a bad thing.”

In recent years, artists and managers including Henley, Crow and Azoff have testified before congressional committees attempting to change the royalty rules under copyright law. A potential agreement between labels and the NAB fell apart two years ago.

Without directly commenting on the Clear Channel/Big Machine deal, the NAB issued a statement, reported by the Times, saying it remained “steadfastly opposed to a government-mandated 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.”

Scott Borchetta, Big Machine founder and CEO, told the Times that during a time of changes, the deal offers predictability.

“We want to say, ‘this is coming,’ and we want to be ready for it when it comes,” Borchetta said.