CCM+E To Share Revenue Streams With Big Machine In New Financial Model

New Model

CCM+E has announced an agreement with BIG MACHINE LABEL GROUP that changes how they pay a label and its artists for music. For the first time, a record company and its artists will participate in all radio revenue streams -- including broadcast radio.

In a letter sent by President/National Programming Platforms TOM POLEMAN, the new policy was explained:

Programmers,

As JOHN HOGAN has said a number of times, change, innovation and a willingness to take intelligent risk are beliefs woven into the fabric of CLEAR CHANNEL MEDIA + ENTERTAINMENT's culture. In keeping with that spirit, I'm proud to share that today you, along with all of our stations, are once again at the forefront of another exciting change for the good of the industry.

We've announced a groundbreaking agreement with BIG MACHINE LABEL GROUP that changes how we pay a label and its artists for music. For the first time, a record company and its artists will participate in all radio revenue streams -- including broadcast radio.

Currently, 98% of our listening is terrestrial broadcast and 2% digital -- with labels and artists only paid for the 2%. In this agreement, label and artist compensation will now also be connected to our terrestrial broadcast revenue, similar to the way we pay songwriters through ASCAP, BMI and SESAC. While BIG MACHINE represents a small percentage of the total music we play, this move is historic because it introduces a completely new structural model for our businesses.

Why the change? Because it's good for the long-term health of the music and radio industries. For digital radio to grow, it's critical to have a predictable, sustainable pay structure that aligns radio, label and artist interests. And we're excited that SCOTT BORCHETTA and his team at BIG MACHINE were willing to work with us on a revolutionary approach. Scott is a visionary who built BIG MACHINE and career artists like TAYLOR SWIFT from scratch in less than 10 years by doing things differently and not being afraid of change.

It's a bold move. And, yes, it will cost us more money in the short term and possibly even in the long run. But we believe that this is a risk worth taking to ensure a healthy future for both our business and the music industry. Under this new, aligned structure, radio, labels and artists now all stand to make more money as we drive the growth of digital radio. Our interests will be linked. As we make money, labels and artists make money.

We will certainly discuss similar agreements with other labels. Because of the expense, we may not be able to partner with everyone until we see results from accelerated digital growth to offset the cost of sharing our broadcast radio revenue. But these are the kind of risks we have to take to be an innovator and fundamentally change our industry.

Nothing about this agreement or our relationship with BIG MACHINE changes the way you program your stations. You should continue to look for and play the best songs to serve our listeners and achieve the highest ratings possible. This should have no bearing whatsoever on which songs you select and how you play them. We just wanted to get you in the loop about this important announcement.

Today is an historic day. And I'm sure you share my pride in CLEAR CHANNEL for continuing to take risks and for being an industry leader. Together with BIG MACHINE, we're building a strong foundation to ensure the future growth of our industry.

"For years, record companies and media companies have looked for a new way to do business together that would bring our interests into line," said BIG MACHINE Pres./CEO SCOTT BORCHETTA. "In CLEAR CHANNEL, I found partners who shared my big-picture view of how we could structure an agreement to benefit all involved. Not only does this partnership enable BIG MACHINE to participate in terrestrial broadcast revenues, but we are also helping to grow digital radio -- a great opportunity for all of us and a breakthrough opportunity for BIG MACHINE artists."

"SCOTT BORCHETTA has reinvented the music business in many important ways over the years, from distribution and artist development to promotion and advertising," said CLEAR CHANNEL CEO BOB PITTMAN. "Focusing that same creativity on how best to grow the music business, SCOTT has developed this new model with us to let his labels and artists participate in the revenue of broadcast radio immediately and in digital radio as it builds. This is a big step, but we think this investment is an opportunity worth taking to align our interests in all of our revenue streams and grow digital listening to its full potential with record labels and their artists as our partners. This landmark agreement creates a structure that makes sense for both our companies -- but most of all for music fans."

"Today, 98% of our listening is terrestrial broadcast and 2% digital -- with record labels and artists only paid for the 2%," said CCM+E Chairman/CEO JOHN HOGAN. "This new agreement expands label and artist participation from just digital to terrestrial broadcast radio revenues in one comprehensive framework that will give all of us a great incentive to drive the growth of the digital radio industry and allow everyone to participate financially in its growth. This market-based solution helps bring the best in music to radio listeners wherever they want to hear it."

CCM+E EVP Marketing-Communications WENDY GOLDBERG told ALL ACCESS, "We're not disclosing specific terms. But what I can tell you is that it aligns the interests of BIG MACHINE and its artists with our interests in a fair and mutually beneficial partnership that will accelerate growth and innovation in digital radio. It changes the fundamental structure of how we do business by putting how we pay for both broadcast and digital radio under one consistent structure." 

"This payment structure now aligns our interests and matches how we make money in radio -- we'll be paying BIG MACHINE and its artists much the same way we pay ASCAP and BMI," added GOLDBERG, "ie revenue-based."

The NAB weighed in, saying "NAB remains steadfastly opposed to a government-mandated performance tax on local radio stations. Beyond our respect for private contracts, we take no position on free-market agreements negotiated between broadcast companies and other businesses."

Both CBS and CUMULUS have declined official comment at this time, however CUMULUS did indicate that this deal did not impact its iHEARTRADIO deal with CLEAR CHANNEL.

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