The empire strikes back

As the music industry's "pay-for-play" scandal deepens, the big five record labels try to crush the expanding power of the dreaded indie promoters.

Published August 7, 2002 8:00PM (EDT)

The long-awaited battle inside the record business over independent promotion may finally have begun.

Record and radio insiders report that several major record companies have quietly introduced new payment schemes for the influential middlemen known as independent promoters, or indies, who peddle songs to radio. Concerned about the runaway costs of indie promotion, which by some estimates costs the music industry more than $150 million annually, label executives say they're determined to return some fiscal sanity to a process that to most outsiders does not appear sane.

For artists, it's virtually impossible to land significant FM commercial radio airplay today without paying indies. Each single shipped to radio can cost hundreds of thousands of dollars to promote.

According to one indie who requested anonymity, RCA Records recently notified him that in order to get credit -- and pay -- for a radio station that has added one of the label's new singles, the station now has to play the song at least 50 times over a six-week period. Spins during the overnight shifts, when few people are listening, don't count toward the quota.

Today, indies simply bill record companies after an affiliated station adds a song to its playlist, while some programmers use overnights to get credit for playing songs they don't actually like. RCA's stricter guidelines could reduce the number of payments the label has to make. Ron Geslin, head of radio promotion at RCA, could not be reached for comment.

A week after RCA's move, Atlantic Records quietly announced that it would only pay indies for songs that received 75 spins over the life of the record. (There was no mention of overnight airplay.) Radio airplay today is closely monitored by two companies, Broadcast Data Systems and Mediabase, so record labels can determine which stations are playing what songs and how often.

Elsewhere, sources say that Doug Morris, chairman and CEO of the Universal Music Group, home of MCA Records, Interscope and Motown, has instituted an aggressive attempt to cut indie fees throughout the company.

At Sony Music, chairman Tommy Mottola, as well as Columbia Records president Donnie Ienner, a former radio promotion executive himself, are said to be readying their own internal offensive against indie costs.

Caught in the middle of a severe economic downturn, which has arguably been exacerbated by the availability of free music online, label executives say they simply cannot afford to pay millions of dollars to middlemen who may or may not generate hit records. In the age of radio consolidation, in which regional and corporate programmers have more say in what songs get played on stations nationwide, labels are questioning the influence of indies, who work primarily with local programmers.

"Everybody's going to cut their rates," predicts one senior promotion executive. "Every record company is getting killed. Downloading music is quicksand right now. How do labels figure out that whole situation? That's a five-year project. In the meantime, how do we cut costs? Do you cut indie promotion, or cut people?"

Adds one major-label veteran: "If a record doesn't break at radio and you're out $50,000 on radio promotion, that would be OK. But today you're out $250,000. That's a big difference."

The indie system has been entrenched for decades, and the labels helped create it in hopes of dancing around existing payola laws. But now, thanks to an unprecedented consolidation in the radio industry and the creation of a broadcasting behemoth like Clear Channel, a handful of large broadcast groups and their exclusive indies wield unprecedented power. That makes the slumping record companies nervous.

Record companies pay indies depending on the market size of the radio stations. Ten years ago, labels paid approximately $700 for adds in major markets, $400 for mid-sized markets and $300 for the smallest markets. Today, the pricing structure has ballooned to roughly $2,000, $1,500 and $1,000, respectively. And that's just the beginning.

"The real money is the incentive on top," says one top-40 indie. Indies often collect additional bonuses ($1,000 or so) if a station adds a song in a particular week, if a song's spins increase and if a song reaches certain heights on the station's playlist.

And that's just for one song at one station. Each week labels release dozens of new songs to hundreds of stations around the country, and money flows with every playlist transaction.

Why did labels, a willing participant in the system, let it spiral out of their control? The main factor is probably fear of failure. Mainstream commercial radio remains the most effective way to sell the largest number of records. Without significant airplay, artists' careers are doomed. And the pressure to get on radio becomes so intense that labels, desperate to manufacture hit records, are willing to pay whatever it takes, including the fees demanded by the indie toll collectors, for a shot at airplay.

In the early 1980s, Warner Bros. and Columbia, upset about the influence amassed by a group of powerful indies known as The Network, launched an outright boycott. That was the last time major labels tried to stand up to the indies -- before CBS sold Columbia to Sony. According to Fredric Dannen's 1990 music industry exposé, "Hit Men," the boycott collapsed after the labels' marquee artists -- Loverboy (a platinum act at the time) and the Who among them -- revolted after having trouble getting songs on the radio.

Today, labels are attempting a more nuanced offensive against the indies, such as introducing airplay guidelines, as RCA and Atlantic have done. They're also looking to Washington for help. In March, Salon reported that the major labels, under the auspices of the Recording Industry Association of America, were joining forces to draft proposed new rules governing indie promotion and present them to the Federal Communications Commission.

Last month, senior executives from the five majors met with an RIAA representative to discuss the FCC proposal. Recently, Senator Russell Feingold, D-Wis., introduced the Competition in Radio and Concert Industries Act, which also calls for a crackdown on indie promotion.

Critics complain that existing payola laws, which have been on the books for nearly half a century, are badly outdated and completely ineffective in today's sophisticated marketplace, where radio stations hammer out exclusive relationships with indies, who pay them (or their corporate owners) hundreds of thousands annually. Once an indie "claims" that station as his or hers, the indie can bill record companies every time the station adds a new song to its playlist. To turn a profit, indies have to make sure their exclusive stations add enough new songs each year to offset the payment the indie made to claim the station in the first place.

If labels cut the rates they're willing to pay indies for adds, the middlemen, locked into expensive deals with radio-station owners, could lose millions.

By Eric Boehlert

Eric Boehlert, a former senior writer for Salon, is the author of "Lapdogs: How the Press Rolled Over for Bush."

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