Clear Channel, Big Machine Label Strike Deal

Companies call broadcast, digital revenue-sharing arrangement ‘groundbreaking’
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Clear Channel Media and Entertainment and Nashville-based Big Machine Label Group have struck a business arrangement which both companies say will grow digital radio. Under the arrangement Big Machine, and its artists, become the first record company to directly participate in Clear Channel’s terrestrial broadcast radio revenues, changing how labels and their artists are typically paid.

Neither company was specific about numbers, but the deal seems to align the business interests of radio and the music business in a new way.

The timing of the announcement is key, since it comes on the eve of a congressional hearing on the future of audio that will include representatives from the record labels, music publishers, as well as broadcast radio and Internet audio services. Any deal involving Clear Channel, the largest radio group by both revenue and station count, is influential to the rest of the radio industry.

Right now, 98% of Clear Channel’s listening comes from terrestrial broadcast and 2% from digital. However record labels and their artists are only paid for that 2%, according to Clear Channel Chairman/CEO John Hogan.

Hogan calls the new arrangement a market-based solution that expands label and artist participation from “just digital to terrestrial broadcast revenue in one comprehensive framework that will give us all a great incentive to drive the growth of the digital radio industry and allow everyone to fully participate financially in its growth.”

The broadcaster has long diversified its content across many platforms, including AM/FM, HD Radio, satellite radio, on the Internet at iHeartRadio.com and on the company’s station websites, on the iHeartRadio mobile application on iPads and smartphones and used via navigation systems from TomTom, Garmin and others.

Clear Channel CEO Bob Pittman calls the arrangement “a big step” that benefits both companies. For Clear Channel, the investment is an opportunity worth taking to align the broadcaster’s interests in all of its revenue streams and grow digital listening with record labels and their artists as partners, he said.

The Big Machine Label represents artists like Taylor Swift, Tim McGraw and Rascal Flatts. For years, record companies and media companies have looked for a new way to do business together, and this deal does that, according to Big Machine President/CEO Scott Borchetta. He said the deal also offers a way for Big Machine’s artists to breakthrough on digital radio.

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