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Monday, October 1, 2012
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Radio Inking Labels at Iceberg Stage

In Respect: A brilliant radio engineer died this past weekend. The list of accomplishments left by Steve Church makes for awe. Exponentially, taking the numbers of people impacted by each station that used something Steve created/invented, he touched humanity at a Steve Jobs level. Everyone in the radio industry should stop for a moment and honor this man.

It's official. Clear Channel M+E inked a second record label into a deal where "revenues are shared" in exchange for a royalty performance fee. The impact on radio trades is like watching a "wave" go around the stadium.

There are dangers to this approach of having radio groups sign individually with record labels, and insurmountable obstacles that prevent industry wide adoption.

"To make this system work, every radio company needs to meet with every major and minor label." Give consideration that nothing is being shared on how these "deals" are constructed. So we have a near metaphor for a challenging Republican team promising a new economics day, without saying how they will make it work.

I'm not so trusting that making deals with labels is going to expand new artist airplay. A concern, relative to the numbers of songs getting exposure, is how severely limiting this may become. If a company knows that playing artist "X" is going to save it money, why play artist "Y" (who requires a performance royalty)?

Neither of the above, though, constructs my main objection to radio groups signing individual contracts with labels. Here's what does: To make this system work, every radio company needs to meet with every major and minor label; the logistics of pulling this off is more complex than putting a man on the moon. (Just how do you think major labels are going to "negotiate" when they get called to the room?)

Labels that are signed with radio groups hold an airplay edge, with fewer artists getting a shot at being heard. Keep in mind that these "deals" are for both over-the-air and online spins.

Meanwhile the performance rate continues its upward growth, with predictable downward pressure on an ability to operate for profit. ("The Internet Radio Fairness Act" is a reasonable response to an incumbent royalty payment system that's heavily tilted towards the labels.)

This iceberg that we see only a tip of today, the Clear Channel and Entercom label signings, is going to have strange consequence when its full effect hits. The number of stations operating platforms that pay station royalty fees will grow, and the radio industry will see more competition.

To the unaware: Live365, MyRadio, Radionomy, Shoutcast, etc., all offer stations programmed by "enthusiastic amateurs." Many of these companies pay the station's performance royalty. If we see a further tightening of radio industry playlists due to royalty deals with labels, companies like these will represent a greater share of the radio audience than they do today.

Clear Channel-owned Inside Radio reports "National Association of Broadcasters president Gordon Smith says the shift to a market-based resolution comes even as broadcasters are working more closely together."

Of course, as a radio industry trade owned by the radio industry's largest group, it needs to show that what its owner did is good for all. You won't read anything at IR about how difficult this concept will be to pull off, nor will you read any details.

It's those details that will sink the concept - because smaller radio groups will not be offered the same "deals" as Clear Channel or Entercom.

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