Thursday, August 16, 2007

Radio and the labels: Outlandish accusations and propositions

There’s money in chaos. That’s what the Record Industry Association of America (RIAA) is counting on.

Here’s a quick explanation for those not in the business.

Radio stations that play new and current music have only so many slots open each week to add new music.

Added value tacked on to a title can provide more influence and weight than, let’s say a decision maker’s professional opinion.

The clean version used to be offering a station a promotion – like a free show or a trip to see the artist in concert –in exchange for an add.

Elliot Spitzer may disagree with the process but we’ll let him duke that one out with Ayn Rand disciples.

The dirty version is, of course, payola, where the only winner is the designated hitter.

Blame the music business for payola - not radio. Radio’s only guilt is buying into it.

Following 1996’s radio deregulation, the radio chains – those that bought up everyone else – required non-traditional revenue (NTR) to meet the bottom line and service debt. Deals were cut with independent record promoters to offer them the inside track – the ultimate influence – for labels to get their music added at radio.

The radio industry went full-tilt boogie pay-for-play.

Money talks, good music that can’t afford the payoffs, walks.

The label promotion chieftains – those in charge of working radio for adds – are pressure- cooked to get their music on radio. Radio airplay still translates to sales and influence on other media – including music video channels - and song charts.

Indie promotion afforded an easy way out for labels, allowing its salespeople solid radio airplay guarantees on pay-for-play titles. The labels hired the indies with a “don’t ask, don’t tell” premise.

The labels created and recreated payola many times over the last fifty years – maybe more.

It was profitable for radio during the “legal payola” years since it had the upfront on the deal. Based on market size, indies doing rep for the labels charged, $75,000 to well into the six figures per year in a lump sum – paid in advance - for control of radio playlists.

Call it the path of least resistance.

Labels never spend their own money on anything. They spend their artists’ royalties. That’s where their wrath should be directed. Lunches, dinners, parties, giveaways, contest costs are charged against an artist’s royalties.

To the labels, honor is an archaic notion at best and sardonic naiveté at worst.

The pay-for-play deals came to an abrupt halt when the FCC defined “legal payola” as illegal.

With that plug pulled, radio and the labels started snarling at each other like rabid dogs.

Just like radio, the labels have gone through their own expensive consolidation and the pay-for-play costs started hurting their bottom line when the teen acts pool they depended on went dry. With fewer royalties to extract – the labels need their own version of NTR.

The labels struck first by telling radio its free ride was over, insisting that if radio wants to play music, they’ll have to pay the RIAA through its SoundExchange collection agency for the privilege. And that includes any music – new or old.

Call it payola in reverse or Revenge of the Weasels.

There aren’t any laws on the books requiring radio to do so – but the RIAA is targeting easy-to-sway lawmakers to change the rules and make it official.

The National Association of Broadcasters (NAB) is trying to fight back – but, like a drunken brawler on a Friday night, David Rehr hasn’t been able to land a punch on the RIAA. Instead, he took a few on the chin and a couple in the gut when the RIAA in its MusicFIRST Coalition disguise came a’callin’ on the House Judiciary subcommittee hearings a few weeks back. Their goal is to establish and make law a sound recordings performance royalty for broadcast radio.

The RIAA tries to pawn the MusicFIRST Coalition as a true coalition of recording artists.

It’s not.

They armed themselves with folk singer Judy Collins and singer Sam Moore, formerly of Sam and Dave.

Why Judy Collins? We haven’t heard much from her since the Clinton era. Turns out she’s released a new album, Judy Collins Sings Lennon & McCartney– and this hearing made for a great opportunity to get in a few plugs for it.

Moore, who still gets airplay on stations that haven’t switched from oldies to classic hits, did his sordid saga on the free ride radio has by freely playing his music without offering compensation.

Sam, you’re targeting the wrong enemy. Stax, your Sam and Dave days label got slicked out of owning your music masters some thirty-plus years ago by Atlantic Records. It was legit. Someone on the Stax side neglected to read the fine print.

Since then Atlantic has become part of Warner Bros. and now that company is run by the aging kid who bought his way into the biz by liquidating his family’s booze bank, Edgar Bronfman, Jr.

Memo to Sam: I was the only one in a Borders record department the other day. While scanning the R&B compilation CDs, I found six R&B “greatest hits” albums that had Sam and Dave tracks. I also noticed that all your old Stax albums were on CD, too. Now tell me - when was the last time you got a royalty check from Edgar?

Moore also dropped Bo Diddley’s name as another artist, in ill health, and forced to tour to make ends meet. He continued to do shows even after his left foot was amputated. A few months later Bo nearly shed this mortal coil when he suffered a stroke.

I scanned the record store for Bo’s music, too, and also found tracks he recorded in a half dozen R&B compilations as well as a CD copy of Bo Diddley – The London Sessions.

Who owns Bo Diddley’s long-time label Chess these days? Glad you asked.

Following a paper trail, I learned that in 1969, Chess Records, always notorious for not paying royalties to its performers, sold the company to GRT records. GRT dumped the Chess catalog in 1975 to a company called All-Platinum Records. All-Platinum turned out to be tin-plated and went belly-up with the Chess masters ending up with MCA in a liquidation deal. MCA is now the Universal Music Group.

My question. When was the last time Bo got a royalty check from Universal?

What the RIAA is doing is trying to circumvent labels from paying royalties owed to its artists by putting the culpability on radio.

Collins and Moore represented “semi-retired recording artists” under the RIAA’s MusicFIRST Coalition banner.

I couldn’t find Sam Moore’s concert schedule but Collins is good for fifty to eighty concerts a year - hardly what one would call a semi-retirement itinerary.

As the Internet radio on-line trade RAIN pointed out earlier this month, following the Sam and Judy show, “a statistical analysis (based on terrestrial radio airplay) reveals that the largest individual beneficiaries would be the major record labels... by several orders of magnitude.”Best case scenario? Moore’s all-things-are-perfect best shot would be an annual check of $12,000. The RIAA would take the rest - $50 million - and split it four ways with the multinational labels it represents. Collins’ take would be top out at $900. She spends more than that on a case of wine.

Still, if tertiary artists like Sam and Judy could bring down the House that effortlessly – imagine what’ll happen if the RIAA calls in the Eagles.

Most artists feel that radio has more coats of slime than the labels.

Why?

Take U2. They paid a king’s ransom for radio airplay following the disappointing response and sales of the album Pop. Except for classic rock stations, they were over at commercial radio.
In 2000 "The Ground Beneath Her Feet" from the Million Dollar Hotel soundtrack, garnered zero airplay in the U.S. since there was no money attached to it because the band’s management chose not to free up some earmarked U2 royalties for pay-for-play. A promo single was released but it wasn’t worked – nor played - at radio.

Later that year, when the album All That You Can’t Leave Behind was released, U2’s management authorized the label to dip into the U2 royalty bank to work “Beautiful Day,” its first single.

It became one of the biggest, most played radio hits of that year – and the band was back in action.

The band covered all bases and even stroked one of the indies working All That You Can’t Leave Behind in its album credits.

In 2002, U2’s management declined to authorize pay-for-play dollars for the single release of “Electrical Storm.” It hit number four on the charts in the UK, number five in Australia – but died at number seventy-seven in the U.S. – and received no commercial radio airplay.
In 2004, big bucks were put on “Vertigo,” the first single from the album How to Dismantle an Atomic Bomb – and like “Beautiful Day,” it was all over radio.

And you were under the impression that radio plays U2 because they’re talented?

Right about now, if you’re not directly involved in the radio or record business, you have to wonder if the rationale of our media and culture industries - beyond the need to make money and entertain people - is to discover, cultivate, and reward talent.

Sadly, no. It’s more like that biker bumper sticker that reads, “Gas, grass or ass – no one rides for free.”

To the multinational labels, honor is an archaic notion at best and sardonic naiveté at worst.

A few weeks back I intentionally ducked the mob mentality that surrounded the release of a 40-page study titled, titled Don't Play It Again Sam: Radio Play, Record Sales and Property Rights. It was written by a University of Texas, Dallas professor - Stan Liebowitz. Among other things, it implied that radio airplay actually hurts record sales.

I refused to feed into it.

Regrettably, others did and the radio industry’s brusque protests put it on the front page of every trade paper and music industry web site. That provided the RIAA the opportunity to paraphrase Shakespeare: Radio doth protest too much.

When some trade magazines and music web sites asked for my response – I gave a three-word answer, “Liebowitz is misinformed.” Period.

In all fairness, maybe radio doesn’t have the clout it once did when it comes to exposing new music – but it continues to have a notable influence on sales and other media.

The subculture radio flouts is from the world of small, independently owned and operated labels and their artists who are not represented by the RIAA. Their exposure comes from Internet radio, downloading, street buzz, and airplay on a few public and college stations.

The labels already have an in to put down Internet radio should they so desire: the Digital Millennium Copyright Act (DMCA), which was signed into law in 1997. The RIAA intentionally concealed the law from Internet radio until they showed an influence on sales.

The RIAA holds the cards since other digitally-delivered media, like MusicChoice cable and Sirius and XM satellite radio have been paying the freight to the RIAA for the DMCA since its inception.

Unlike Internet radio, their royalty fees were built in to the cost of doing business at satellite and cable. Internet radio, where far less than one percent of its operators show profit, was initially led to believe they were exempt.

Eventually, it’ll come down to one resolution: never underestimate the value of a cash bribe.

Did you read where Clear Channel doled out $1.2 million in the first half of 2007 for lobbying on Capitol Hill while the RIAA funneled a little less than half that amount - $658,000 to be exact - during the same time? Of course, one will never know if a few close-to-the-stage Police tickets exchanged hands as an unregistered bonus. Like cash bribes, there’s prodigious value in a primo ducat. And no one knows that better than the RIAA.

Clear Channel’s lobby payments were for securing private equity firm issues – but a few dollars were set aside to fight the RIAA.

Read that carefully. That’s for the first half of 2007. If Clear Channel continues to rain money on Capitol Hill at that clip, we’re talking $2.4 mil worth of influence peddling by year’s end. If the RIAA matches their first half, their lobby bill will top out at $1.3 million.

It’s not a done deal for the RIAA but the NAB had better start writing some mega-sized checks to their own lobbyists to stay in the race for radio.

The one good piece of news for the radio side came from Nashville entertainment business attorney Fred Wilhelms who’s noting some shell game improprieties with the RIAA, Sound Exchange, and the MusicFIRST Coalition triumvirate. Wilhelm’s been wise to – and on the label’s inefficiencies and crafty deceptions for years.

If you’re the gambling type, bet on the side that pulls off the best pay-for-play job at the Congressional level for the remainder of 2007.

What’s the difference between an indie and a lobbyist? Not much.

And if the RIAA didn’t invent Dr. Liebowitz, they should’ve.

17 comments:

John said...

I really don't see an end to payloa in some form or another...ever. The only thing that will make it less effective is the empowerment of the people through the internet. The more sources one can be exposed to music the better.
Sure, gatekeepers will come along and will be bribed, but I believe the net savvy youth of today are too smart to fall for it. Maybe that's naive of me but I'll stand by it.

johnbfree said...

Radio hurts records sales? Internet radio hurts recod sales? It is apparent that the recording industry is out of touch with, well everything. I am a child of the 70's when disco was king. We heard Chic on the radio and we ran down to Record Theater to buy the SINGLE. If it weren't for radio, I'd have been listening to my dad's Elvis records. What is hurting record sales dates back 20 years. As CD's and cassettes replaced vinyl so we could play our own music in cars, the single vanished. Sure they tried Single CD's and cassettes or CD's and cassettes with 3 or 4 songs on them, but they charged $2 or $3, which was a lot more than the 60 cents you would pay for a single. Then those vanished and you were forced to buy a full album to get the one sone you heard. Do the math. A teenagers allowance only goes so far, so instead of buying 3 or 4 singles on Friday, they had to choose which one album they could afford. Fast forward to the digital age, MP3 files had and have the potential to be the new single, in fact they are. But are you going to pay $0.99 to buy a song you've never heard? I would not. And remember when you could trade records with your friends and share you favorites with others(word of mouth marketing). try that now and they trow you in jail. Hard to buy music when you're in jail. Furthermore, if radio kills record sales, then why are the labels PAYING radio for airplay? These folks must have rode the shortbus. How does one hear the new Fergie music if it isn't on the radio? Maybe the Business major frat boys should have studied instead of taking the test out the the filing cabinet at the frat house and cheating their way through college.

johnbfree said...

Please excuse the above typing errors. The secretary is off today.

Sam said...

Your story on U2 explains makes it all clear to me. I heard both U2 songs you mention on the radio in Europe and Canada and always wondered why they were not played in the states? If radio stations want to know why we don't listen to them anymore and record companies want to know why we don't buy their product they should read your blog. You can lead a horse to water but you can't make it drink.

Music lover said...

At least in the westerns there were the bad guys in the black hats and the good guys wearing white. Both the radio and the record industry are black hats. There are no good guys on either side. It is for that very reason that listeners have shunned radio and consumers no longer buy music at record stores.
I learn about new music from friends and the internet. I am also a legitimate downloader and buy my selections on iTunes.
I would still listen to radio if they played what I and everyone else I know really wanted to hear. BTW, satellite radio has become a musical wasteland too. I had both XM and Sirius. I am not renewing either one.

Anonymous said...

You brought it home with your comments about U2. Even they had to pay to get played? I'm not a U2 fantatic but I enjoy their music and have through the years. You would think an established group like them would not have to bow down to the payola gatekeepers.

Anonymous said...

hi john. love your blog. i grew up listening to your stations in cleveland. wmms, wmji, wncx, whk and i also followed what you did as a consultant at waaf, wphd, wrqk, khk and wshe. i am in radio now. its the borg. i brought up to our consultant {whose name i wont mention but he bad raps you all the time so you may figure it out} about how you would run seasonal ids, spring, summer {reaches the beaches} and do appropriate music and contests for the season. he tore me a new a****** and claimed that it did nothing but confuse the audience and that you had too many slogans and your playlists were too long and the only reason you had ratings was marketing. i want to stay employed so i said no more. i think your programming won as much as promotion. there were as many m105 and g98 bumper stickers on cars and most had two. you had the better station so they listened to you most. you also had the best jocks too. your promotion and marketing complemented what you did on the air. you were the google of radio back then.

Anonymous said...

Gorman, The question you should ask is if U2 are victims or guilty of buying into the mess. U2 don't need radio airplay. you mentioned in an earlier post how u2 allowed "Vertigo" to be used in an iPod spot for free. I hope U2 ignore payola on their next album release and show the industry that music does not need radio anymore to sell product. Oh, I forgot. The FCC did away with payola. It will probably be back by the time Mr. Bono and his group release their next album.

1 who knowz said...

You bring up some interesting points and I side with you on the labels creating payola to make their work easier. It's only when it gets out of control that the labels complain about it. The labels and the RIAA should be investigated by congress on many levels but they won't because they can buy their way out of the mess just like Clear Channel got away with owning more stations than the legal limit in many markets. What both the labels and radio fail to comprehend is consumer behavior. The consumer will go elsewhere if over manipulated and that appears to be what is happening in both industries. Fewer people listen to radio and fewer people buy music. It's not that difficult to figure out why.

i'm sirius damn it said...

you didnt mention it so i will. when stanley liebowitz released his study on radio ineffectiveness to record sales the biggest screamer was little steven van zandt. he was the biggest idiot of all since all he was doing was trying to save his sorry radio show. it used to be okay. its run its course. his sirius channel just plain sucks. i know from your history that you know steven and maybe that is why you didnt acknowledge him yet he was right in the middle of the firestorm that
liebowicz ignited. and why does that garage channel studio always smell like stale vodka?

Anonymous said...

I have a question to ask you (and the music-radio industry). How many independent record promoters are now Washington D.C. lobbyists. It is the logic progression. You should also alert your readers to Fredrick Dammen's The Hit Men that covers payola in the 1980s. If you Google Randy Michaels and other Clear Channel related names you will get the complete rundown on how Michaels set up the payola deals of the 1990s.

Watts said...

Radio, CDs, and even record labels themselves are on their way out thanks to the internet. It's what the record/radio companies deserve, and it's just a matter of time in my opinion, the labels are just putting off the inevitable.
That said, re: the U2 example:
C'mon, Beautiful Day and Vertigo are simply much better songs than Ground Beneath Her Feet and Electrical Storm. They at least deserve a discount ;-)

Craig said...

Okay, so how can radio airplay HURT sales? What...? If anything, it should show that payola to get crappy songs on the radio is a bad idea. Although I haven't read the report, I know a thing or two about reading into results. Sure, maybe some songs that are being played on the radio aren't getting expected sales, but is it the radio airplay that's hurting the sales? In this case, I think not. That's like blaming the referigerator for a drop in food consumption when all it holds is moldy food.

Once again, the music industry shows it's true colors.

Anonymous said...

John Gorman; I enjoy your blog. I agree with the comments about Judy Collins and Sam Moore. I will wager that both were paid for their performance by the RIAA.

Do you remember when Sam Moore went on the road with a phony Dan a few years back? No wonder the RIAA considers him a credible source.

Judy Collins semi retired? Hah.

Winton said...

To correct a previous post here. It was Dave that teamed up with a phony Sam. I have heard a few stories about Sam and Dave wanting coming close to blows and death threats.

You are right about Sam Moore. He should blame his labels not radio. In fact he should be pleased that his music still gets airplay after all these years.

I also bought a Sam and Dave album once that was a collection of hit songs but they were not the originals and it sounded terrible.

Small Market Owner said...

One sector of radio that has not been considered here is the small market. Most smaller markets (say from 20,000 to 150,000 people) have at least some stations are still owned by individual broadcasters who compete with stations owned by the big guys like Clear Channel. The smallest markets that dot our nation are almost exclusively owned by mom-and-pop companies. In many cases, these private stations are owned by very talented broadcasters or operators whose primary goal is to cater to their local community, and, as a result operate very successful radio stations.
While we small operators may not have the clout or cash to lobby congress on this royalty issue, it is we who will be hurt the most if this plan comes to fruition. NAB tells us that the RIAA proposes to take anywhere from 10% to 35% of our gross income. (not profit - INCOME) Taking that amount of money before expenses (and taxes) will seriously cripple, and more likely, destroy small market operators. For a radio operation that bills $1M annually, that means the RIAA would collect anywhere from $100,000 to $350,000. (This is more than the government takes.)
I don't pretend to know all the statistics on the percentage of profit that average small operators make, but based on personal experience, I estimate it ranges anywhere from 15% to 30% of gross income.
Simple math dictates that the operators who are already operating as lean as possible will immediately fold. For those who operate with a few expendable expenses, this will, at best, seriously compromise the quality of programming. The first thing to be cut when facing such an enormous loss is salaries. A loss of real live airstaff (it's the only way we program here) means going back to satellite programming. Satellite programming means a loss of listenership, and a loss of listenership means a loss of advertising dollars. Eventually the small market operator can't pay the bills and, then what?
Oh, and the "black hats" of radio you're referring to only exist in the top hundred or so markets that are monitored by R&R or Billboard. The rest of us just program based on their charts. The whole radio industry isn't corrupt, it's just the few at the top. The rest of us are just trying to make an honest buck.

victor said...

I really enjoy your blog I found it on a link from another blog. I was reading I would love to ask you some questions on what media companies have there finger on the pulse. I worked in radio 15 years and you seen what has happened to the bussiness im seeking direction.