CC Version of Radio's Future

[SirRoxalot]

Let there be no misunderstanding of how Clear Channel view the future of radio. From today's Taylor on Radio Info:

Clear Channel Chairman/CEO John Hogan says "today 98% of our listening is terrestrial broadcasting and 2% digital, with record labels and artists only paid for the 2%." He says "this new agreement expands label and artist participation from just digital to terrestrial, in one comprehensive framework that will give all of us a great incentive to drive the growth of the digital radio industry."

CC’s Tom Poleman says “for digital radio to grow, it’s critical to have a predictable, sustainable pay structure that aligns radio, label and artist interest.” The company knows it’s headed toward far more IP delivery via iHeartRadio and other methods, and to make that work economically, it needs rates that work.

So much for those pesky towers, transmitters, and licenses. Hope you can afford a data plan.

 

[Casey]

I don't see how this can work. Although details are scarce, it appears the revenue sharing deal fails to actively take into account how much a label contributes to the songs played on the radio. It seems the labels could have their artists release virtually no new content or tons of new content, and they will get paid the same either way until the contract comes up. A revenue sharing deal taking into consideration plays, like Spotify does, would make a lot more sense.

This deal will just anger people. The labels will swallow the money formerly given to artists through soundexchange. Indie labels will be up in arms if Clear Channel decided to expand this to the Majors, as it would squeeze them out. And Clear Channel doesn't even know if this will save them money? "And, yes, it will cost us more money in the short term and possibly even in the long run. "

 

[TheBigA]

The fact is that something was going to happen on this. The music industry was pushing Congress harder and harder for a royalty that would cripple OTA radio the way it's crippled Pandora. A huge portion of their revenue based on per play rather than percentage of revenue. The ASCAP/BMI model works best for radio. By doing an end-around Congress, this gets at least one label what they want, and keeping the feds out of the process. Hopefully the feds will see that the two industries can solve this without regulation, and stay out of it. OTA radio companies will get a big discount on digital royalties in exchange for a small percentage of on-air revenue. Certainly companies like CC and CBS will like this idea. Smaller companies with no digital footprint won't. But the labels might be happy to just get the money from the majors and leave the small guys exempt.

 

[TheBigA]

It seems the labels could have their artists release virtually no new content or tons of new content, and they will get paid the same either way until the contract comes up.

The battleground always has been new material and new artists. Radio likes old & familiar, the labels want to break new stuff. It's expensive to break new stuff. So the money the labels get from the royalty will be driven into promoting new music. Radio will likely reap some rewards here in terms of more promotion money for new music and artists.

HOWEVER this type of stuff typically only went to big stations in big markets. So while the little guys won't see any improvement in the non-service they've been getting (if the phone doesn't ring...), they will likely remain exempt from any additional royalty. Let's face it: There was always a group of station owners who were never going to pay a new royalty if one was forced on them by the feds. This potentially takes that mandate off the tabel, and allows the poorer stations to continue to operate royalty free. But they won't get a break on digital royalties and they won't get any label promotion (which they haven't received anyway).

 

[davideduardo]

This deal will just anger people. The labels will swallow the money formerly given to artists through soundexchange. Indie labels will be up in arms if Clear Channel decided to expand this to the Majors, as it would squeeze them out. And Clear Channel doesn't even know if this will save them money? "And, yes, it will cost us more money in the short term and possibly even in the long run. "

It's my understanding that SoundExchange distributes money to three broad groups: to the labels directly, to the "featured artists" directly, and to other artists (like session musicians) via associations. Payment based on play of digital recordings as well as the holder of the copyright on the performance.

If Clear does deals with labels, the labels will have to consequently make provisions with their artists as to how they divide up the revenue. I would guess that there would be some organization set up representing indie labels which could, in blanket form, collect royalties.

Since the base for much of this negotiation is airplay ("streamplay?") the payments look like they still would be relatively well based on play. The idea is to keep the government out of this, and to create a structure whereby digital media can actually make a profit in the future even if radio is dinged a bit today.

CC is quite notably making a move to survive change by creating a viable digital structure or platform. Negotiating digital royalties so that they can remain profitable is a key to the move to streaming and related digital distribution.

It does not benefit radio, digital media, the labels or the artists if digital royalties are so high nobody can make a profit. As is not terribly unusual, the legislators who put together the DMCA and other legislation don't understand the free market and certainly don't get the fact that unless fees and royalties and taxes are reasonable, all we will get is rampant piracy, streams from countries you have never heard of and no money at all for artists and labels. Oh, and the death of music radio, too.

 

[davideduardo]

So much for those pesky towers, transmitters, and licenses. Hope you can afford a data plan.

Clear Channel has decided to be a survivor, and to level the digital rights playing field in advance of committing the whole company to it. They understand that the "tower and transmitter" delivery system is already in decline. They also know that while radio is still delivering most of the audience they have an opportunity to bargain and create a future scenario more to their liking than were they to wait until Pandora, Slacker, iHeart et. al. had finished eating terrestrial radio's lunch.

This is why Clear brought Pittman in.

 

[TheBigA]

As is not terribly unusual, the legislators who put together the DMCA and other legislation don't understand the free market and certainly don't get the fact that unless fees and royalties and taxes are reasonable, all we will get is rampant piracy, streams from countries you have never heard of and no money at all for artists and labels. Oh, and the death of music radio, too.

Absolutely correct. The DCMA and the CRB are killing digital radio. The ONLY reason digital hasn't become more widespread is because of music royalties. The OTA radio companies have something they can deal with. Companies like Pandora and Spotify don't. The radio companies are using the capital they have in OTA radio to get them a leg up on digital media companies. This leaves Panora begging Congress for a break. And keep in mind that SiriusXM's lawsuit is all about allowing them to do the exact same thing and negotiate directly with labels.

 

[Groove1670]

One word. Greed. Crony Capitalism at it's finest.

 

[TheBigA]

One word. Greed. Crony Capitalism at it's finest.

Nope. This is the opposite. This is paying for something when it's not required.

 

[Groove1670]

No , I have a feeling small broadcasters will suffer. oh well, I guess you will se more news talk stations .

 

[SirRoxalot]

Radio may be the only industry that has 93% of the market, but runs scared over an industry with less than 5% of the market. Why do you think that the cell companies are adamant about not turning on FM in phones? They KNOW that people will listen to FM instead of using up their data plan - just as they do in Europe.

The only thing that will kill the towers-and-transmitters delivery system are companies who think that it's cheaper to deliver content via the Internet. Well, they'd better check on the existing - and projected - problems with the data delivery systems before they give up those towers and transmitters.

The smart answer? Use BOTH systems, and broadcasters would be smart if they supported the FM chip in phones. As far as Pittman is concerned, it appears more and more that he's there to build iHeartRadio into a challenger to Pandora. Well, maybe he'd better look at the Bridge Ratings studies that show listener fatigue reduces Pandora listening after a few months, and that two years out, most Pandora listeners spend less than 20 per day listening to Pandora. Check out that study here.

Then again, that would require some corporate guys to look two years into the future. Their track record indicates that's unlikely.

 

[TheBigA]

The smart answer? Use BOTH systems

That's what they're doing. Even the company that sold most of it's towers and transmitters, Disney, is now leasing a radio station in NYC for its ESPN format. This has never been about a one-or-the-other thing. But if radio is going to stream, the royalty rates need to be changed, and this is one way to do it.

 

[Goat Rodeo Cowboy]

Radio may be the only industry that has 93% of the market, but runs scared over an industry with less than 5% of the market. Why do you think that the cell companies are adamant about not turning on FM in phones? They KNOW that people will listen to FM instead of using up their data plan - just as they do in Europe.

This "protection of the revenue base" shows up another way: The cable folks want to sell you high-speed internet. But if you use your new hi-speed internet to stream movies from another source, the cable company wants to restrict your Internet band-width so you are pushed into getting the movie via the cable company's pay-per-view.

 

[nd2023]

They're afraid of the 5% digital listening because that will grow rapidly. HD radio is a failed attempt for radio to go digital, it is shrinking rather than growing with fewer home HD radios available. Back when the HD radio system was designed, they did not forsee smartphones and satellite radio. The cost to enter Internet radio is just a few hundred dollars, compared to the millions to enter terrestrial radio. The bandwidth caps will increase as 4G deployment increases, notice how AT&T recently increased their cap from 2 GB to 3 GB.

 

[Casey]

The RIAA doesn't think this is good enough. Therefore, there is a good chance that neither will Congress.

"We need an industry-wide solution not a label-by-label piecemeal solution and we don’t know if other radio groups will feel the same economic motivation to do a deal." - Cary Sherman

In all honesty, I agree with him. There has been nothing stopping broadcasters and services from doing exactly what Clear Channel just did. A lot of music services including Slacker, Spotify, Rhapsody, Rdio, etc. have done this the whole time. And it has been a complete mess and incredibly expensive. This has never been done on the broadcast angle before, but it is really all the same. Direct licensing with labels. And this is not ideal, nor feasible for every broadcaster and webcaster to sign directly with labels. The overhead required for small broadcasters, webcasters, and small labels would be immense. We need an industry-wide, or preferably, world-wide solution. Obviously it would be best to do so without Congress intervention, but so far no one can agree on how to do so.

 

[TheBigA]

The RIAA doesn't think this is good enough. Therefore, there is a good chance that neither will Congress.

This Congress has been characterized by their desire to do absolutely nothing about anything. They can't pass a budget. They can't pass necessary legislation. So this has no chance of getting on the floor, and this deal gives them an excuse to do nothing even longer.

The RIAA won't be happy until they get 100% of broadcasting revenues, even for news and sports stations. Their policies have crippled internet broadcasters, causing many of them to go out of business. What do you expect from an organization that sues its customers?

What has stopped broadcasters from doing this before has been the recording industry cartel that required everyone to tow the RIAA line. This move by one indie label broke from the pack. No wonder the RIAA isn't happy. I wouldn't be surprised to see SoundExchange file legal action against the deal.

 

[WNTIRadio]

I guess all of the free promotion in the form of playing their songs 40 times a week doesn't count for anything.

I propose an "hour of silence", on a coordinated day for all broadcasters who play music. Just play the DJ talking, the sweepers and the spots but leave the area where the songs will go as dead silence. At every break mention "This is what radio will sound like if it is forced to pay royalty fees for the music we play" or something to that effect.

Enough is enough. They get their "payment" every time their song is on the radio.

This is another way for CC to squeeze the smaller companies out of the arena who can't afford one more bill.

 

[TheBigA]

I propose an "hour of silence", on a coordinated day for all broadcasters who play music.

It's been done. No one cares. Radio stops playing music? People will get it somewhere else. That's the problem in a world where there is no exclusivity. Hold the music hostage won't help radio's case. And free airplay only matters at the big stations in large markets that drive sales. Not at little stations with no audience. So small AM stations that play music don't matter.

This isn't about being forced to pay for music. This was voluntary. Radio is getting something in return here, which is a huge discount on the digital royalty. And there is no requirement that anyone else pay. So small stations who don't stream won't care. But CC is getting a discount on digital royalties. And they wouldn't if the RIAA Congressional mandate comes about.

The question is if CC can leverage this royalty discount to other broadcasters who stream on iheartradio. If so, that might be huge.

 

[Casey]

The RIAA doesn't think this is good enough. Therefore, there is a good chance that neither will Congress.

This Congress has been characterized by their desire to do absolutely nothing about anything. They can't pass a budget. They can't pass necessary legislation. So this has no chance of getting on the floor, and this deal gives them an excuse to do nothing even longer.

The RIAA won't be happy until they get 100% of broadcasting revenues, even for news and sports stations. Their policies have crippled internet broadcasters, causing many of them to go out of business. What do you expect from an organization that sues its customers?

What has stopped broadcasters from doing this before has been the recording industry cartel that required everyone to tow the RIAA line. This move by one indie label broke from the pack. No wonder the RIAA isn't happy. I wouldn't be surprised to see SoundExchange file legal action against the deal.

Now let's be realistic. They wouldn't stop at 100%.

I have no love for the RIAA. But I do think they have a point this time. Label negotiating is great for large companies, but it will be very difficult for smaller ones. If Clear Channel could work the deal for other broadcasters through iheart or some other way, as you mentioned, that would be great. If companies like live365 could negotiate with labels and then live365 could work with webcasters or even broadcasters, we could see some real progress. But no one seems to be pointing toward that direction and having each company work with the labels is not going to work out well.

 

[davideduardo]

Radio may be the only industry that has 93% of the market, but runs scared over an industry with less than 5% of the market.

You are using the wrong figures the wrong way.

Radio is used by about 94% of persons at least for one qualified quarter hour a week. The average usage in PPM markets is about 11 hours a week per person; through the 90's, the average listening was 21 hours per person per week.

Just because 94% of people make some use of radio does not mean they don't also use new media.

Today, on average, in the prime hours of 6 AM to 7 PM, 9 out of 10 persons is not listening to the radio.

Don't you wonder what all those people are listening to now?

Hint: were it ranked against terrestrial radio, Pandora alone would be #1 in each of the major markets. Add in XM / Sirius, Slacker, iHeart, et. al. and you have something that is approaching the dimensions of radio. And growing, while radio stagnates or shrinks.

Why do you think that the cell companies are adamant about not turning on FM in phones? They KNOW that people will listen to FM instead of using up their data plan - just as they do in Europe.

Keep in mind that FM reception on cellular phones is not as great as one would think. Remember that the earphone cord is the antenna, so, listening via cell phones will for the most part be lost to PPM measurement as it is a bit beyond absurd to think that people will plug in the required PPM adapter to measure such listening.

The only thing that will kill the towers-and-transmitters delivery system are companies who think that it's cheaper to deliver content via the Internet.

Radio is not in the transmitter business. Nautel is.

Radio companies will deliver their product by whatever means listeners prefer. And listeners are increasingly preferring the Internet.