Clear Channel cuts 2nd deal to foster online radio

AP News
Posted: Sep 27, 2012 2:47 PM
Clear Channel cuts 2nd deal to foster online radio

NEW YORK (AP) — Radio giant Clear Channel has cut its second deal with a group of artists in which it will share revenue from traditional radio stations now in exchange for a more affordable royalty rate on struggling digital streaming services.

The deal with Glassnote Entertainment Group includes artists such as British indie folk rockers Mumford & Sons, French alternative rock band Phoenix and Irish indie rock band Two Door Cinema Club.

Clear Channel first established the groundbreaking framework in June with Big Machine Label Group, whose artists include country stars Taylor Swift, Tim McGraw and Reba McEntire. Last week, Big Machine also replicated the model with radio station group Entercom Communications Corp.

For decades, recording artists have not received royalties for airplay on traditional radio stations in the U.S., on the premise that the exposure would boost their album sales, unlike songwriters who received royalties every time their songs were played on the radio.

But CD sales have fallen for a decade, hurt by piracy and the rise in popularity of singles bought on services like Apple Inc.'s iTunes. That has sapped artists' income and prompted recording companies to push for legislation that would make radio stations pay to play their songs.

At the same time, digital radio services like Pandora Media Inc. and Clear Channel's iHeart Radio have grown in popularity. However, Pandora has complained that royalty fees are too high on these fast-growing platforms to make a profit.

Clear Channel's earlier deal with Big Machine shared revenue from ad sales at traditional radio stations for the first time ever, but capped royalties on digital services to a certain percentage of revenue. That creates a better economic incentive to increase the use of online radio.

Daniel Glass, the founder and CEO of Glassnote, said in a statement that the partnership "aligns our business interests more closely with Clear Channel."

"We're excited about being part of the drive to grow digital radio faster and bring all of its benefits to music fans," he said.

The deal was announced about a week after a group of federal lawmakers also introduced a bill that would bring the royalty rate-setting process for Internet radio companies more in line with cable and satellite radio companies like Sirius XM Radio Inc., which pays a lower proportion of its revenue in royalties than Pandora.