The day the music died

The merger of America's largest concert promoter with its largest radio station owner will mean Pringles, payola and more Top 40 from coast to coast.


Mark Schapiro
July 25, 2000 11:00PM (UTC)

John Scher is watching his universe shrink.

In the concert industry, Scher, CEO of Metropolitan Entertainment and the largest independent music promoter on the East Coast, is something of a legend: Along with Ron Delsener in New York, Don Law in Boston and the late Bill Graham in San Francisco, Scher virtually invented the concert business, nurturing it from a helter-skelter operation in the early '60s to the multibillion-dollar business it is today. Scher's office is decorated with Grateful Dead gold records and classic posters from Jefferson Airplane. But this is no nostalgia act: His company owns three amphitheaters on the Eastern Seaboard, produces concerts by the likes of D'Angelo and Brian McKnight and runs a small record label, Hybrid Records.

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On this summer day, however, Scher sits in his company's headquarters, a sprawling three-story Victorian in Montclair, N.J., and tries to adjust to the new facts of his business. Or, more precisely, to one new fact: the impending buyout of SFX Entertainment, the largest concert promoter and venue owner in the U.S., by Clear Channel Communications, the country's largest radio station owner.

SFX and Clear Channel's impending union represents a profound shift of power in the rock 'n' roll concert business. Clear Channel, which announced its purchase of SFX for $3.2 billion in stock in February, is expected to consummate the deal at an SFX shareholders meeting in New York this Thursday. In March, Clear Channel announced its intention to purchase a rival radio chain, AM/FM, for $17 billion, giving it control of more than 900 radio stations across the country. The Department of Justice cleared the deal last week, asking only that Clear Channel sell 99 of the stations to satisfy antitrust concerns (formal FCC approval is expected to be forthcoming).

After one profligate, $20 billion quarter, the company is poised to become the primary conduit through which Americans are exposed to popular music. Scher and other independent promoters like him will face a competitor with a near-lock on the venues, the tours and the radio play and promotion that provide the life-blood of live entertainment. The coming merger of these two enormous media properties will effectively reduce Scher to a vastly outgunned underdog in a business he helped to invent.

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In a sense, it already has. In three short years, SFX has come to dominate the American concert industry, applying corporate marketing strategies to rock and other live entertainment on an unprecedented scale. In the process, it has been squeezing out a diversity of different players -- booking agents, promoters and radio programmers -- those who once were the hidden forces behind the concerts, responsible for marshaling the artists, the venues and the radio play.

Even by pre-Clear Channel standards, SFX is huge. The company owns 200 concert halls across the country and represents more than 40 tours this summer -- many of which it owns outright -- as well as a host of Broadway shows; it also serves as talent agent to sport stars such as Michael Jordan and Andre Agassi. The bands it represents are the biggest and most profitable in the business, from N'Sync to Tina Turner; in June, it purchased the entire Pearl Jam tour, which now plays almost exclusively SFX venues across the country.

While SFX may be huge, Clear Channel is voluminous: In addition to its radio holdings, the company owns 19 television stations, more than half a million billboards, and a new domain address, .cc, based in the Cocos-Keeling Islands, that it promotes with a blanket ad campaign on its own radio stations.

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The new Clear Channel-SFX combine promises an unprecedented level of concentration in an industry that once thrived on the creative tension between radio programmers, concert promoters and artists. Clear Channel is taking over a company that has already destroyed the unspoken system of relationships and loyalties that long characterized the live music business. In the new world of one-stop concert production, booking agents have been castrated, already-successful bands are offered fantastic sums in return for centralized control and less well-known bands are left with fewer places to hone their sound.

Today, Scher looks at his former peers and competitors and sees just one corporate logo: SFX Entertainment, which purchased Delsener-Slater, Don Law, Bill Graham Productions and dozens of other smaller promoters over the past three years in a tidal wave of cash and stock buyouts. Scher's colleagues, many of whom launched bands like the Velvet Underground, Bruce Springsteen, Talking Heads, Blondie and countless others through a legendary combination of favors, wiles and muscle, are now part of a company which played the Brady Bunch theme at a simulcast meeting in April to introduce the former independents now working under SFX's corporate umbrella. That in-house broadcast featured the grinning faces of nine formerly independent promoters (from St. Louis, New York, San Francisco, Houston and elsewhere) in split-screen, nodding at each other as the Brady Bunch tune ran with lyrics tweaked for the occasion: "Here's the story of a bunch of companies ... That's the way we became SFX."

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"Being independent now means something different every year," says Scher, sitting in his office surrounded by rock memorabilia. "Three years ago, there was no SFX: We were all independent. Two years ago, SFX was of a certain size, and there were still a lot of us left. Now they're in with Clear Channel, and independents are anybody who's not with them ..."

"Will this new entity come in and play nice with the neighbors?" Scher asks sardonically.

Since the day SFX went public in early 1998 -- with CEO Robert Silberman ringing the bell of the New York Stock Exchange, flanked by loyal sidekick Rod Stewart, who Silberman guaranteed in excess of $350,000 a night -- the company has radically transformed the concert industry. In going public, SFX sought to guarantee a season-to-season predictability in a notoriously volatile business dependent on the ebbs and flows of artists' popularity and fans' willingness to spend money on tickets to see them. The collapse earlier this month of Diana Ross and the ersatz Supremes "reunion" tour is a sign that the SFX formula -- big names and high prices -- doesn't always work.

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"You cannot assume that because everyone is flocking to Mvtley Cr|e one year they're going to go in the same numbers to James Taylor the next year," comments a skeptical Ben Liss, who left Don Law's concert production company in Boston shortly after Law sold out to SFX in 1998. Liss went on to found the North American Independent Concert Promoters Association (NAICPA), which is attempting to defy SFX by coordinating national-scale tours with the remaining independents. (Scher's Metropolitan and Jerry Michaelson's Chicago JAM Productions are the largest remaining indie producers).

"SFX is the 800-pound guerilla," says Gary Bongiovanni, editor of the concert industry trade journal Pollstar, "and nobody else is anywhere near 200 pounds."

SFX's modus operandi from the outset has been to squash competition from the independents by offering unprecedented guarantees to artists -- a practice that has led to astronomical ticket prices and rise in 'facility' fees, adding as much as $4 to $5 to the price of a ticket at SFX venues (on top of the $5.50 or so usually charged by Ticketmaster, with which SFX has an exclusive relationship). This year alone, the company locked up at least 20 national touring acts with outright purchases -- including N'Sync, Ozzy Osbourne, Tina Turner and Pearl Jam.

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SFX has such a lock on concert venues that it is nearly impossible to launch any national tour without dealing with the company in one form or another. Its dominance of venues has been marked by an epidemic of renaming, as one arena after another is christened in honor of new corporate sponsors: Fleet Pavilion, Continental Arena, Staples Center. In April the company unveiled its latest addition to the legacy of rock 'n' roll: Pringles as the new "official salty snack of SFX venues," featuring upturned potato chip canisters cum conga drums for concertgoers anxious to try their hand at percussion, courtesy of a multimillion-dollar promotional deal with Procter & Gamble.

Now, the accumulated might of SFX and Clear Channel threatens to occupy the terrain of live rock 'n' roll with an overpowering concoction of marketing muscle and promotional overkill.

Three years ago, Clear Channel was a provincial power in the San Antonio radio business. In 1996, the company took a leading role in lobbying Congress for the Telecommunications Reform Act of 1996, which expanded the number of stations that could be controlled by a single owner from four to eight in major national markets. Clear Channel went on a blitzkrieg of acquisitions after the act was passed. It took just 18 months for control in the radio industry to shift overwhelmingly to two companies: Clear Channel and Infinity/CBS, whose combined billings, according to the trade publication Duncan's American Radio, are 10 times those of its closest competitor, ABC.

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Ironically, listenership appears to have suffered as consolidation has intensified. According to Duncan's, the radio audience has dropped an alarming 12 percent over the past decade. The antidote, Duncan's suggested, would be "a commitment to localism -- local operations, local research, local programming decisions, local promotion, local news and events."

In fact, the opposite is occurring. In its rise to the top, Clear Channel followed the golden merger formula: amortize costs and pare down differences. In many cities where the company owns up to half a dozen stations, operations are overseen by a single general manager and ads are sold by a unified business staff. Guidelines for playlists are sent out from the company's radio branch headquarters in Covington, Ky. Musical formats echo one another from coast to coast, with little regional variation. Drive from New York to Los Angeles with the radio blasting and the music doesn't change much. Gone are the days when you might catch onto a new band on the radio in Philadelphia, Chicago or Detroit: The uniformity of playlists has become a fact of the airwaves. Now, with those SFX venues in its pocket, Clear Channel aims to bring that same spirit to the concert business.

J.P. Anderton, a vice president at Duncan's, says that Clear Channel's formatting is overwhelmingly "CHR, contemporary hit radio." In other words, Top 40. Translated, that means big bands with big marketing muscle on a national scale. "Clear Channel," says Anderton, who covers ratings and audience surveys for Duncan's, "has the types of stations that play the music that fills the [concert] venues."

SFX's control of those venues is what enticed Clear Channel into the deal. "We see a lot of synergy between the two companies," comments Randy Palmer, Clear Channel vice president for investor relations. "There are big cross-promotional activities. Who pushes a concert? Radio. And vice versa: The artist and the concerts can promote the local radio stations."

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That level of concentration is what makes independent promoters nervous. "It's a two-sided sword," says Gary Bongiovanni, "giving them [Clear Channel] the power to say: 'Do your show with us, and we can give your record heavy airplay.'"

The ability to leverage radio play for concert appearances veers dangerously close to what was once known as payola, the infamous practice outlawed in the 1950s in which record companies paid disc jockeys to spin their latest tunes. "Instead of blow and sex and cash," comments Dave Kirby, an independent promoter with the Agency Group in New York, "it's payola in a different form." The key difference, of course, being that the money ends up not in fewer pockets, but in one huge pocket. The new Clear Channel-SFX combine gets it both ways.

"If the government felt that Bill Gates and his company could be divided, they should be coming to the same conclusion with SFX and Clear Channel," asserts Kirby. Kirby came face-to-face with SFX's marketing muscle when he put together the heavy-metal Tattoo the Earth tour this summer and was forced to book exclusively in non-SFX venues (which are harder and harder to find) because SFX feared competition with its wholly owned tour of Ozzy Osbourne's Ozzfest.

Clear Channel's president of radio operations, Randy Michaels, provided a taste of how the new musical hydra could ratchet up that marketing muscle. In an interview with the Cincinnati Enquirer shortly after the merger was announced, Michaels asserted that during an upcoming Britney Spears date in Ohio, the company had no intention of tying in the usual promotions and celebrity appearances with any non-Clear Channel station. "When Britney Spears comes here," he told Enquirer columnist John Kiesewetter, "is [CBS/Infinity station WKR]Q going to get a piece of that? No, they're not."

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Such practices are "certainly possible" elsewhere once the merger has gone through, says Clear Channel executive Randy Palmer. In other instances across the country, bands have been threatened with removal from Clear Channel station playlists if they refuse to appear in an SFX venue.

The SFX-Clear Channel combination puts artists in a difficult bind. Pearl Jam's ill-fated effort to defy Ticketmaster in the mid-'90s -- which led to the cancellation of the band's tour, and a virtual collapse of resistance to corporate dominance of the ticket industry -- hangs like a specter over artists who might consider resisting the new combine. Few musicians can afford to bite the hand of a company that they must rely on for concert dates and radio play.

About as vocal a protest of the merger as you'll see from any nationally recognized musician is a comment on the Indigo Girls' Web site. Even artists like Bonnie Raitt, who announced her opposition to the National Association of Broadcasters' effort to repeal the FCC's introduction of new low-power FM frequencies, did so several times at SFX venues -- venues which will shortly be owned by Clear Channel, which played a major role in lobbying against the low-power initiative.

Jennifer Toomey, former lead singer of the indie rock band Tsunami, bemoans the impact on small bands just starting out, many of whom face a dwindling number of venues in which to play. Toomey is co-founder of the Future of Music Coalition in Washington, which aims to promote the culture of independent music. "You're going to have more music that's huge and on every station across the country," she says, "or music that doesn't get played at all."

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SFX has already shattered the intricate dynamic of relationships that once characterized the live music business. The tacit understandings that once sustained concert promoters as powerhouses in their own regions have been ruptured as SFX propels concert promotion onto a national scale. Now, all bets are off. Recently, Scher began promoting concerts -- by Korn, the Backstreet Boys and Brian McKnight, among others -- at independent venues in the heart of Don Law territory in Boston and Providence, R.I.

"The entertainment industry is different from any other business," says Scher, who continues to hold out hope for independents like himself. "There is one essential ingredient you must have: living, breathing, dancing human beings. In that regard anyway, they won't be able to control everything."


Mark Schapiro

Mark Schapiro is a freelance writer based in New York. His work has appeared in the New York Times, Harper's, Harper's Bazaar and the Utne Reader.

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