Clear Channel’s move to make a direct licensing deal for over the air performances with record label Big Machine is a stunning development for the radio industry. I’ve spent a day or so pondering all the ways this could impact the issues, and have come away marveling at what a forceful move this was by Bob Pittman and his team. (Read excellent coverage by RAIN here.)
The radio industry has been refusing to cut a deal with record companies that would compensate artists for over the air play in exchange for a better deal on streaming royalties. Broadcasters and the NAB have tried and failed to come up with a solution, and the issue is currently headed for Congressional intervention – with Future of Audio hearings that started yesterday on the hill. Hence the incredibly nervy and savvy timing of Clear Channel’s announcement that they had signed up to pay a share of both on-air and online revenues to record label Big Machine, the company behind such big names as Taylor Swift, Rascal Flatts and Tim McGraw.
Bob Pittman is indeed just what the radio industry needs.
The radio industry has been moaning about streaming royalties for years. This has caused them to take a half hearted approach to Internet radio, which in turn has created mediocre offerings that are not competitive with highly developed interactive offerings such as Pandora, Spotify and others. But their unwillingness to pay over the air royalties to artists makes the record labels unwilling to negotiate better digital deals with them.
Meanwhile, online listening is growing exponentially.
“Unrealistic rates on the digital side were choking the ability to expand digitally for radio companies,” said Irving Azoff, a Clear Channel director and chairman of Live Nation Entertainment Inc.. “We’re trying to convince labels to enter into a direct deal because we can’t get legislation passed,”.
“Someone has to go first, someone has to take a risk,” said Clear Channel CEO Robert Pittman. “If digital grows a lot, this will be a good deal. It’s a gamble. But you win nothing if you don’t take a chance.”
So Pittman took a chance. He took a look at the future of radio and decided that digital is it. Reluctant to let Congress determine how his game will be played, he cut a deal with a little record company that has a few big names. By doing that he forced the first brick out of the wall between broadcast radio and performance royalties for artists, and I suspect we’ll see the whole thing come tumbling down. Broadcasters will pay over the air royalties, because their hand was forced, but also because it just doesn’t make sense that other platforms have to and they do not. Playing fields will be leveled, programming will improve and opportunities will grow – for radio stations and for recording artists.
“We should be wherever our listeners are.” That’s the very simple premise that former MTV Exec Bob Pittman says Clear Channel is pursuing as he builds out their multi platform strategy. According to Pittman, Clear Channel already has a great strategy and systems in place, it is just a matter of rolling it all out.
Pittman says the listener doesn’t care about what device they are listening on, but they do care what they are listening to. He points out that Clear Channel’s got a large number of those brand loyal consumers. Whereas Google has about 175 million uniques on a monthly basis in the US, Clear Channel has over 200 million. Keeping them satisfied by offering them as many ways to listen as possible is the name of the game.
What about Pandora? Pittman sort of side steps that question, simply offering the stat that “only” about 4% of listening right now is to digital or online platforms, implying he’s not really concerned – yet.. He does point out that listening online “appears to be additive” meaning that listening online adds to total time spent listening to a station, which is of course a very good thing.
Pittman has put $5Million of his own money into Clear Channel, which makes him a credible spokesperson as well. Here’s the quick interview: