Taylor Swift's record label has cut a groundbreaking deal with radio giant Clear Channel that pays the singer and other artists more money now and paves the way for the growth of online radio.
The deal announced Tuesday gives Swift and other artists in the Big Machine Label Group, including Tim McGraw and Reba McEntire, payment for songs played on Clear Channel's traditional radio stations for the first time, starting immediately.
In exchange, the artists agreed to cap their royalties from play on Clear Channel station websites and simulcasts on its iHeart Radio streaming service to a portion of a fixed percentage of revenue.
The deal gives Clear Channel the incentive to boost its online audiences without fear of cost overruns.
Terms on the multi-year deal were not disclosed.
Big Machine CEO Scott Borchetta said that Clear Channel is making the equivalent of a down payment on the future of digital radio. He said the revenue in question was "not millions of dollars" annually, but "substantial" for a small label.
"We're going to more than double our income from Clear Channel in the short term, and they'll make it up on the back end as digital continues to grow," he said.
Clear Channel CEO Bob Pittman said in a statement, "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."
Performers and their record labels are allowed by law to take a mandatory minimum payment per play online, which equates to a fraction of a penny per listen. But the growth of online listening on mobile devices and in cars is outstripping stations' ability to sell online ads.
Clear Channel is looking to cut similar deals with other labels, while Big Machine is ready to take the model to other radio broadcasters. Currently, the revenue-share model does not apply to so-called custom listening online, where listeners select genres or artists and stream music that is randomly generated within certain guidelines.
The deal is a big win for the record industry, which has been trying to secure royalties from songs played on traditional radio for decades. Since the advent of radio in the 1920s, songwriters have made a little money every time their tunes are played on stations, but performers haven't made a dime, because it was assumed they'd benefit from record sales. The decline of music sales has made radio revenue sharing deals a big priority for artists.