Clear Channel and Warner Music, one of the "Big Three" music labels, signed a partnership Thursday that will share the radio giant's revenue for unprecedented promotion of Warner artists on air and online, as well as efforts to make it easier for digital listeners to buy Warner's music when they hear it.
The pact, Clear Channel's first wide-ranging strategic alliance with a major label, underscores how both labels' and traditional radio are testing new ways to ensure self-preservation in the digital age.
The partnership means Warner Music will share in revenue from Clear Channel and get special treatment on its 850 radio stations, online radio feeds, and its iHeartRadio digital service. The companies said aligning their interests would drive digital growth, increase radio's audience, and attract attention to Warner's new and legacy artists.
At first blush, the deal sets up Clear Channel to pay for things it didn't before while also promoting things it wasn't before, but Clear Channel CEO Bob Pittman told CNET in an interview that both work in the radio operator's favor as well as the label's. "The more we can regularize the relationship with the music company, the better we can" connect music fans to artists, he said. "When we're promoting an artist, it not only helps the artist and the marketing company, it's helping us."
He said the deal has an economic structure that makes sense for Clear Channel. He wouldn't go into further detail about the terms. He also said one of Clear Channel's top goals with the partnership is growth of the digital marketplace for digital radio and custom radio.
An industry source said that Warner Music benefits from the tie-up by getting more payments for its sound recordings and Clear Channel benefits by smoothing out unpredictability in its licensing costs.
Traditionally, terrestrial radio doesn't pay labels to play the sound recordings of their songs, although the Digital Millennium Copyright Act did set up a sound-recording royalty for services over the Internet.
The recorded music industry has shriveled in the last decade as sales have shifted to digital forms, only recently reaching the point that recorded music's overall trade value worldwide has ceased a more than 10-year slide. Most of the credit for the stabilization is due to physical sales finally reaching their nadir, while growth in digital sales continues.
Meanwhile, entrants into online radio have been encroaching on traditional radio's turf -- and driving up the costs and unpredictability of royalties in the meantime. Though AM/FM still commands the lion's share of the radio audience, traditional broadcasters have largely sat on the sidelines as upstart digital services have taken the lead in delivering innovative radio products with new technology. The coming launch next week of iTunes Radio, Apple's online radio service linked to its iTunes program with an installed base of more than , will bring the same player that upended the sale of recorded music into the realm of radio.
Warner Music, however, has been one of the more progressive of the major labels to seize upon digital opportunities lately. It was the, and it reportedly .
Labels have also taken a contentious route to protect royalties in the digital age. This week, labels including Capitol Records, Sony Music Entertainment, and Universal Music Group -- though not Warner Music --, accusing it of not paying royalties on music recorded before 1972.
Thursday's Clear Channel pact will include special programs using the radio operator's digital footprint, including its digital simulcast, digital-only stations, and custom stations, as well as special audio and video content, programming, and promotions. It will also launch targeted online interfaces so consumers can easily buy Warner's music as it plays.
CeeLo Green, a Warner artist, weighed in on the partnership.
"The reach of radio, its power to promote, coupled with a recognition of the value of music makes this a great opportunity for artists and a promise to all people that finding their favorite music is fun and fundamental," he said in a statement.
That's cogent praise for a singer who rose to fame thanks to a chorus of upbeat, explicit invective.
Update, 7:55 a.m. PT:Adds additional details and context.
Update, 12:07 p.m. PT:Adds interview with Clear Channel CEO.