In cutting a deal to pay artist performance royalties to Fleetwood Mac for the band’s new EP, Clear Channel Media & Entertainment continues to enter deals to pay royalties for master recordings from terrestrial radio advertising in exchange for predictable reduced rates for digital radio.
According to Clear Channel, it’s the first rights partnership between a radio company and an artist, but the company has already cut deals with 11 indie labels including Big Machine, Glassnote, Naxos and Wind-Up.
“Reaching an agreement with [Fleetwood Mac] is the clearest sign yet that this kind of revenue-sharing model represents the industry’s future — it is a win-win-win, for artists, fans and the music business,” Clear Channel CEO Bob Pittman said in a statement.
While the U.S. music industry has long sought performance royalties for master rights owners and artists — which are paid in most other countries — it has never achieved that right stateside. The closest the industry has come was in 2010 when, at the behest of Congress, labels and radio stations negotiated such a performance right and royalty, but those talks broke down and the legislation wasn’t enacted before the session ended. The impetus behind the direct deals is because in the digital space, where radio must pay artist performance rights royalties by law, it’s hard to predict costs as the rate typically involves a per-play/per-listener formula. While a station can estimate the size of its audience in a terrestrial market and thus estimate a payout if one was required, on the Web it isn’t able to predict how many listeners may stream a station, since the potential audience is worldwide.
Consequently, in order to build a sustainable Internet model with a predictable cost for royalties, the station is willing to compromise and make royalty payments to artists and master rights owners on terrestrial broadcasts. Fleetwood Mac’s new “Extended Play” EP was released on its own label and is only available digitally. In its six weeks of availability, the release has scanned about 12,000 units, according to Nielsen SoundScan, most of which came in the first two weeks. There’s no word yet on whether the EP will be available in physical formats.
“It’s fitting that a group that’s played such an integral role in radio and music history would be the first band to take such a major step,” says Azoff Music Management’s Irving Azoff, who represents Fleetwood Mac and also sits on Clear Channel’s board of directors.
But one major-label source questions the significance of the deal, claiming Azoff has been a Clear Channel representative in shopping these deals to the majors.
According to sources, the deal Clear Channel is offering consists of paying each record covered by the deals a pro-rata share of 1% of ad revenue from terrestrial radio, while paying 2% of digital ad revenue.
“The economics don’t work because it is a short-sighted deal,” a major-label executive says. “They’re betting they’ll be paying less overall in artist performance royalties in the future than they’re paying now.”
But indie labels like the deal, because “we are getting nothing now from terrestrial radio, and the bigger percentage we get from digital radio now won’t make or break our business,” says an executive at a label that has inked a deal with Clear Channel.