Will Radio Royalties Save Music?

By Mike Galaxy

The US is one of the only  countries that has given radio a pass on paying mechanical royalties to bands and labels. To "Radios" defense, spins at stations with large audiences is damn good exposure for bands. Although radio is still a major source of artist discovery for many of American music fans, terrestrial listeners have dwindled with fans opting for more user friendly services like Pandora and Spotify. In the 80s we would fill our glove box up with cassettes, but these days your car can be filled with nearly limitless digital music. So why the need for radio...and commercials? There are still many Americans who prefer a DJ to dictate what's cool and what's not. There are still many Americans who like to listen to Rihanna, Bieber, Taylor Swift, Coldplay etc.. over and over and over to the point the listener is ready to kill it at the local Karaoke bar.

Ok, back to royalties. Radio has paid out performance publishing royalties for nearly 100 years since radio began pumping out Christmas Songs over the airwaves. Clear Channel has just inked a ground breaking deal with the country label Big Machine (Taylor Swift) (Distro Universal) to pay the label royalties every time their artists are played on all 850+ Clear Channel stations. FYI, Clear Channel controls the airwaves having AM, FM, Internet station iHeartRadio as well as 12 stations at satellite radio XM. Their annual earnings for 2011 were over $6 Billion...yes that's a "B". To give some perspective, that's about the same as General Motors entire revenue for 2011. Who says radio is dead? So yes, it's about time radio start sharing some of those profits with the very people that help them make their "Billion$". Frank Sinatra's wish, and tireless fight for these royalties has finally come to fruition. It's a start!

So why are they offering these royalties now? Some suggest it's a preemptive move to avoid potentially higher royalty rates which Congress has been mulling over and would likely pass in the coming year. Remember, internet radio has been paying these mechanical royalties since their inception. Some how terrestrial radio has avoided it till now.

Who will actually win with these royalties? Yep! Rihanna, Bieber, Taylor Swift, Coldplay etc.. With thousands of spins each week, that translates to some big bucks for the labels. And since they have these crafty 360 deals, they'll be recouping revenue from any angle possible. But what about the indie virtually unknown artists? You'll get to bump up from the hard shell taco to the Double Decker. ; ) But hey, it is still great exposure and hella bragging rights to say your band got played on ENTER YOUR LOCAL STATION CALL LETTERS HERE.

So why did Clear Channel opt to pay out additional royalties without the instance of the FCC, The Library of Congress or even the National Association of Broadcasters? It's clear! Radio is declining and labels are turning more effort and attention to the online music services for discovery and delivery. Clear Channel wanted to beat out the other broadcasters with sweetheart deals early on and making nice with the labels so the labels will continue to slide them their best new acts and other goodies. I'm anxious to hear how CBS Radio (Formerly Infinity Broadcasting) and Cululus Media will respond. 

UPDATE June 13, 2012
According to Arbitron stats, 93% of Americans still listen to broadcast radio. (Arbitron is to radio what Neilsen is to TV.) That's nearly 243 Million listeners...and they suggest that 15% of them are under the age of 12 while 600,000 new listeners joined in the past year. Huh? Is this all the hard working Latino laborers? You can't drive by a construction site without hearing pop Mexican songs. I will say that at least 50% of my music listening is to LA's KCRW and more specifically Morning Becomes Eclectic which features new and emerging bands and artists. Until Pandora can replicate the DJ discovery experience, broadcast radio will dominate. 

Stay tuned for more details and developments on more radio/label deals.

Photo credit: WKRP in Cincinnati (CBS)