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To Cheat Death, Music Industry Should Look to Spotify, Pandora, Not Clear Channel

Stocks in this article: CCMO P AAPL

NEW YORK ( TheStreet) -- I had to laugh when I saw Clear Channel (CCMO) Chairman and CEO Bob Pittman take to CNBC last week to, kind of, sort of, explain his company's partnership with Warner Music Group.

It's a bit difficult to understand what some are calling a "revenue sharing" agreement when the parties refuse to disclose financial details. According to several reports, Warner will receive a share of Clear Channel's broadcast radio advertising dollars plus special promotional opportunities.

For example, The Wall Street Journal claims Warner "will effectively reap more per song played on IHeartRadio's custom radio service than it does from internet radio giant Pandora (P)." Under the deal, Warner will also receive special treatment through Clear Channel promotional programs:

One such program that Clear Channel is creating exclusively for Warner Music is an "enhanced" version of its "artist integration" initiative, which advertises emerging artists on the air at Clear Channel's expense. Clear Channel offers other labels such promotions for just several weeks surrounding a new release, but for Warner Music's artists, the promotions will run up to 15 weeks.

This brings up good questions, but few answers from the Neanderthals involved.

Here's my take: No meaningful amount of cash is changing hands. Clear Channel is paying Warner a nominal amount of money per spin or play, just enough to make Pandora look bad and to shift focus from the fact that broadcast radio doesn't pay a performance royalty.

CNBC's Jon Fortt made an important query on Twitter shortly after Clear Channel and Warner announced the hookup:

When you combine that question with this quote from Warner CEO Stephen Cooper, via a Ryan Faughnder article in the Los Angeles Times, things get even more confusing, if not downright shady:

This is, in a very well organized and thoughtful fashion, marrying Warner's content with Clear Channel's massive distribution capabilities. What that means to our artists is that we'll be able to capitalize by exposing our artists to hundreds of millions of users. We are very confident that that exposure will help drive Clear Channel's business and the success of our artists and music.

So how is this any different from what radio has been doing for labels and artists since Todd Storz invented the Top 40 format? Until Clear Channel does a deal with every label under the sun -- using the same terms -- how is this anything but a modern-day version of payola?

While it doesn't sound like Warner will pay Clear Channel to play certain songs, it will, apparently, receive preferential treatment from the world's largest radio company. I don't know enough about this deal -- because they haven't told us much -- to take this past the speculative stage. But it sure smells like two companies who let the world pass them by taking a step back in an attempt to preserve old ways of doing business.

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