Big Machine Label Group and Entercom Communications today announced an agreement to align their business interests and accelerate growth and innovation in digital radio. Through this mutually beneficial arrangement, Big Machine will become the first record company to directly participate, along with its artists, in Entercom’s terrestrial broadcast radio revenues. Entercom has a nationwide portfolio of 111 stations in 23 markets, including San Francisco, Boston, Seattle, Denver, Portland, Sacramento and Kansas City.

BMLG reached a similar agreement with Clear Channel in June. Terms of the deals have not been disclosed.

Artists signed to Big Machine’s wholly owned labels who will benefit from this agreement include Big Machine Records artists Taylor Swift, Tim McGraw, Rascal Flatts, Edens Edge and Ella Mae Bowen; and Valory Music Co. artists Reba McEntire, Justin Moore, Brantley Gilbert, The Mavericks and Thomas Rhett. The deal doesn’t include Universal Republic artists.

“This agreement represents a bold step forward to align our interests with those of Big Machine and their artists. While the deal comes with some significant costs and risks, we believe that by working with the labels and the artist community to establish a new business model, we will ultimately enhance the opportunities for all parties concerned,” said Entercom President and CEO David Field. “I also want to acknowledge Scott Borchetta, [and Clear Channel’s] Bob Pittman and John Hogan for their vision and leadership in blazing the trail that made this deal possible.”

“As great and leading visionaries in the broadcast world continue to look into the future, they are seeing where listeners are going in regards to how radio is being used now and where and how it will be used in the very near future. Among the many choices in the audio entertainment landscape, radio is now portable again thanks to smartphones and soon-to-be ubiquitous Internet streaming in the car,” said Scott Borchetta, President and CEO of the Big Machine Label Group. “David Field and his cutting edge team at Entercom Communications completely understand this vision. I’m honored that they have joined us as partners in growing digital radio as well as compensating the artists that provide great musical content for their terrestrial stations. They have chosen to lead and everyone in the artist and creative community applauds their bold leadership role.”

Agreements of this kind are important in two respects: 1) the Clear Channel deal marked the first time artists will be paid a performance royalty for radio airplay in the United States. Traditionally, only songwriters/copyright holders have received radio performance royalties. 2) It is designed to drive digital radio growth.

The new business model set forth in the agreement is designed to level the royalty payment playing field for all types of radio. The model has BMLG and its artists being paid terrestrial performance royalties in exchange for a lower rate on digital performance royalties, which will distribute the royalty cost more evenly between both kinds of radio.

Under current circumstances, which the new model aims to change, the growth of digital radio is stunted because a high percentage of each company’s income goes to pay artist and songwriter royalties. These royalty rates are often based on individual song plays, and though they are fractions of a cent, can add up very quickly to large sums. By comparison, a low percentage of terrestrial radio station revenue goes to royalties, which are exclusively paid to songwriters via the performing rights organizations. Additionally, terrestrial radio recently entered a different agreement to decrease the rates it pays to the P.R.O.s.

The Wall Street Journal said the Clear Channel agreement “represents a historic shift,” calling it “a major bet that radio’s future is online rather than over the air… With the growing ubiquity of smartphones and more cars that include Internet-radio options, consumers are spending more time listening to music online, escalating the royalty costs along the way.”