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Warner Music follows indies in agreeing new royalties arrangement with Clear Channel

By | Published on Friday 13 September 2013

Warner Music

Warner Music and Clear Channel yesterday announced a new alliance which has various components to it, but most importantly sees the mini-major agree to a deal with the US radio giant similar to that previously entered into with some key independents, whereby the media firm will pay royalties for music used on its AM and FM services in return for better royalty rates on its rapidly expanding digital platform iHeartRadio.

As much previously reported, in the US – unlike in Europe – record companies do not receive royalties when their tracks are played on terrestrial radio services (though the owners of the song copyrights, ie the publishers, do). The record industry has long lobbied for a change in American copyright law to force radio firms to start paying to use their content, but to date without success.

Satellite and radio services do, however, have to pay royalties, and can do so via collecting agency SoundExchange, which charges rates set by a statutory body. However, some digital services reckon the SoundExchange rates are too high, and have considered doing direct deals with the labels instead. Though as some at the labels reckon the statutory rates are, in fact, too low, that approach won’t always work.

What Clear Channel has done, though, is to exploit its traditional business to help it’s new one, ie persuading the labels to play ball on digital by voluntarily offering the record companies a cut of profits being made on AM and FM. It’s a clever way to gain competitive advantage in the increasingly competitive streaming music market, and also protects Clear Channel if and when the record industry finally persuades US Congress to introduce a compulsory royalty on traditional radio services.

US indie Big Machine was the first label to strike up such a deal with Clear Channel, and a number of other independents, and other radio firms too, have since agreed similar arrangements. Though the Warner deal is significant because of the size of the major’s catalogue, which makes the alliance much more wide-ranging than anything that has gone before.

Confirming the new alliance, Clear Channel chief Bob Pittman told CMU: “The team at Warner Music understands that old formulas don’t work as well as they must in the digital age, and that we have to think differently to build a robust future for the music industry. Today, music companies and media and entertainment companies need to be more supportive of each other’s needs. This agreement begins that new era, and will help both companies thrive in the digital world”.

In addition to the royalties arrangement, Clear Channel also commits to staging a series of promotions across its networks for new artists and new releases coming from Warner labels. The major, in return, will presumably offer exclusives and priority access to its acts.

Welcoming the partnership from his side, Warner Music CEO Stephen Cooper said: “We are delighted with this multi-faceted alliance, which we are confident will generate greater overall revenue for our artists and labels, while providing a host of powerful new promotional opportunities to reach a wider audience. This deal is further evidence of our efforts to be nimble in artist development, our determination to create profitable new methods of breaking original music and our commitment to sustainable digital innovation. This agreement underscores that WMG is a music company in a class of its own”.



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