Radio station operator Clear Channel Communications has signed a new licensing deal with Warner Music Group that signals the growing importance of online music streaming.
Under the terms of the deal, Warner will collect royalties for music that is broadcast on Clear Channel’s 850 radio stations. Clear Channel will also promote Warner Artists. But Clear Channel will get reduced royalty rates for music streamed online, the noted.
While the specific terms haven’t been revealed, sources said the multi-year agreement requires Clear Channel to pay the label a lump sum that would cover both digital and broadcast rights. The deal would cut Clear Channel’s payments for streamed music from 22 cents per 100 songs to a minimum of 12 cents per 100 songs.
Radio broadcasters have long resisted paying royalties to music labels for songs played on radio stations. However, record labels have been able to charge digital streaming providers like Pandora (P) and Spotify, hefty royalty fees under existing U.S. law.
In fact, high royalty fees for online streaming have been a source of friction between music labels and tech giants like Apple (AAPL), which is jumping into the streaming business with its iTunes Radio, set the launch this fall.
With consumers increasingly migrating toward digital streaming, pressure is rising on online providers to find a way to cut royalty fees. Clear Channel, which streams music across numerous websites, has already negotiated deals with a number of smaller labels, but the Warner agreement marks its first such deal with one of the big three labels.