LOS ANGELES, Calif. - Radio station giant Clear Channel has signed a deal with Warner Music Group Corp. that will for the first time give a major recording company and its artists a cut of revenue generated from traditional radio station airplay.
The deal is similar to one Clear Channel cut with Taylor Swift and her Big Machine Label Group last year, and bypasses the regulatory environment in the U.S., where traditional radio stations aren't required to pay performers royalties for airplay.
It has long been assumed performers benefit from the radio exposure in the form of sales. But CD sales have been declining, making radio royalties more important.
Warner Music, the world's third largest recording company, will also benefit from promotional guarantees that will help both new artists and its established ones, such as Cee Lo Green, Coldplay and Pink Floyd.
Since the first deal with Big Machine, Clear Channel, the nation's largest radio group with 850 stations, has wrapped up similar arrangements with more than a dozen other independent labels and artists from Fleetwood Mac to Glassnote Records, the home of Mumford & Sons.
This is the biggest so far.
In exchange for a slice of traditional radio revenue, Clear Channel has in previous deals negotiated lower royalty rates for play on its digital radio platform, iHeartRadio, to help promote its growth.
Bob Pittman, the chief executive of Clear Channel parent CC Media Holdings Inc., said in an interview this deal was similar without giving specifics.
"Might it cost us more money today? Absolutely. But is it worth it for growing a new marketplace? Yes," he said.
Steve Cooper, CEO of Warner Music, emphasized that Warner artists will have sustained promotion on Clear Channel radio stations and online before and after album releases.
Pittman said promotions with artists could last up to 14 weeks, up from just a few currently.
"To the extent we've got a thoughtful, predictable structure to exposing our artists and their music to listeners around the world, to the extent that this puts us in a class of our own as a music major, the benefit that we should get from being able to do that are literally immeasurable," Cooper said.