Saturday, September 06, 2003

Payola! With all the turmoil in recording industry, you'll rarely read one salient factor. That is that radio programming is bought and sold. Not by advertisers, but by record companies, who pay for the privilege of having Clear Channel or Viacom play their songs. This is what used to be called payola, and now goes under the politer name of "promotional payments." Like slotting fees in retail stores, it's a quasi-legal practice that makes the radio oligopolies rich and that guarantees that only the Big Five record companies can play. Meanwhile, the listener (unorganized, on the margin) is the victim. Music played on the radio is thus an advertisement for itself, and like most effective commercials, it is played over and over ad nauseam, with the hope that the intended message (here, buy this recording) seeps through. That's why pop stations play the same, centrally determined playlists, and why you can scan the dial and get the same song played at the same time on three or four "local" stations. Clear Channel in particular has the power because it controls the radio shelf space. If you want a lot of listeners to your new pop or rock song, you have to deal with that company. Of course, they also control the available shelf space for more standard advertising. But more and more of their income comes from the payola rather than from the commercials, a situation similar to supermarkets where slotting fees have become as important as margins on items sold. How do the parties involved avoid prosecution? Though a set of intermediaries called independent record promoters or "indies" They give money to radio chains and stations ostensibly to defray the cost of online giveaways of trips, concert tickets, and other stuff. But the payments are for far more than any contests cost. As Salon's Eric Boehlert in an online article  ("Pay for Play") explains: The indies are the shadowy middlemen record companies will pay hundreds of millions of dollars to this year to get songs played on the radio. Indies align themselves with certain radio stations by promising the stations 'promotional payments' in the six figures. Then, every time the radio station adds a Shaggy or Madonna or Janet Jackson song to its playlist, the indie gets paid by the record label. There are 10,000 commercial radio stations in the United States; record companies rely on approximately 1,000 of the largest to create hits and sell records. Each of those 1,000 stations adds roughly three new songs to its playlist each week. The indies get paid for every one: $1,000 on average for an "add" at a Top 40 or rock station, but as high as $6,000 or $8,000 under certain circumstances. That's per channel. To roll a record out properly, you need to place it with a few hundred stations nationwide. We are talking about $100,000 or more per recording. None of this money goes to artists, and when the recording companies cry poverty, it has be in large part due to the payments that make to the radio chains. National program directors for the big chains dictate what each local station will play, according to an article from The Los Angeles Times: All of this happens in a narrow time band, a limited shelf life. Just as movies last in the theatres an average of six weeks, Boehlert explains that recordings basically is done with in 12 weeks. By that time, another set of new releases have come out, and unless yours is one of the top few hits, it gets dumped to make room for others. But this has gone even further. Clear Channel recently signed an exclusive agreement with three indies, and at the same time raised its prices. If you want to get your recording on the air, you pretty much have to go through these three. And they, in turn, pass more money to Clear Channel. However, Clear Channel is being coy about the whole situation, according to the L.A. Times article. The sudden price hikes appear to contradict statements by Clear Channel Chief Executive Mark Mays, who has admonished music executives for wasting money on independent promotion. "I told them, 'Please, don't make the payments,'" Mays said in an interview this summer. "Why they continue the payments I have no idea." Peter Hart, an analyst for the New York-based media watchdog group Fairness and Accuracy in Reporting, accused Mays of "talking out both sides of his mouth. One day he's boasting about cleaning up a corrupt system. The next day we learn that his company is getting more deeply involved in the practice that he condemns," Hart said. "The message is clear: Clear Channel is not serious about cracking down on independent (music) promotion but in fact looking to capitalize on it. The new arrangement will probably give Clear Channel $15 to $20 million more a year in income, according to the article.  Like all well-placed oligonomies, the radio companies have found a way to profit from their status. At least, it will until the whole mess of the current music industry completes the massive disruption that seems inevitable. 11:03:39 AM

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