A lot goes into making a song that’s only a few minutes long.  For your average studio song, key players include songwriters, lyricists, musicians, and a plethora of engineers along with the record companies and publishers who help organize, coordinate, and bankroll the entire operation.  And these different players get compensated differently; a studio musician may get a single paycheck for playing on a track whereas a songwriter will get royalties every time that song gets radio airplay.

Unlike in most other nations, terrestrial radio stations in the United States are required to pay songwriters and publishers whenever a song is played on the radio but are not performance royalties to musicians.  The logic for this system, which has been in place since music radio took over from the old-style “golden age of radio” programming in the early twentieth century, is that the promotional value of having your song played on the radio provides adequate compensation for musicians.  Predictably, musicians and record labels have not always been thrilled by this arrangement.  Still, despite some high profile criticism (Frank Sinatra made it clear that he was not a fan), it has remained the status quo.

A new deal between Clear Channel, the biggest player in the radio game, and powerhouse independent music label Big Machine, however, may signal a change of direction.  Under this new deal, Big Machine will be able to collect royalties whenever a radio station plays songs by its artists, who include Taylor Swift, Tim McGraw, and Rascal Flatts.  While the Recording Industry Association of America has lauded the deal, the National Association of Broadcasters has not been quite so keen.

Writ large, this change appears to be a response to changing listening habits driven by technological changes.  With digital downloading–both legal and extralegal–on the rise and record sales on the decline, labels like Big Machine are more and more focused on realizing additional revenue streams such as radio airplay.  For its part, Clear Channel looks to be preparing for the ascendancy of web-based music services such as its own iHeartRadio, which–unlike terrestrial stations–do pay artists royalties.

Although the full implications of this new arrangement remain little more than speculation, this agreement could signal a watershed change after years of broken negotiations.

–Hunter Branstetter

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