Pay for play

The move could mean higher indie fees for record companies. Tri State was charging labels $1,000 an add at some stations, but sources say those rates could jump considerably if Clear Channel and Tri State join forces.

Indeed, particularly in this deregulatory era, Clear Channel can basically charge whatever it wants. Why? Because record companies realize they can't create a hit without help from the conglomerate.

With that kind of clout, Clear Channel, through Tri State, could institute national buys for new singles. "Labels would pay $100,000 or $200,000 to get a single added to all the Clear Channel format stations one week," suggests one radio source. "And if they don't pay, there is no chance in hell they're getting that song on the radio without Tri State. If it's not on the list, it's not on stations."

And if the song isn't played on the radio, chances are it's not going to make the record company any money.

That raises real red flags at the record companies. "Tolls go up if there's only one road into town. And today you cannot have a hit record without Clear Channel or Tri State," says one record company president whose label recently scored a top-five hit on pop radio with the help of indie promoters. "That allows for an abusive type of toll collections. It seems to be getting out of hand. It's creating burdensome costs and it's screwing with the economics of the music business."

And perhaps most important, any long-term deal between Clear Channel and Tri State would essentially eliminate the all-important middleman. Record companies would instead be paying Tri State for airplay on Clear Channel stations. "That would put it into the realm of payola," says one record company promotion exec.

Clear Channel CEO Randy Michaels recently told the Los Angeles Times that the company does want a piece of the promotional pie, but only through an odd new twist: It plans to sell promotional packages to record companies that would identify the artist after each song is played.

But in a business swimming in money, some doubt things could become that cut and dried. For instance, what Clear Channel is proposing is something stations usually do for free; it's called "back-announcing," letting listeners know which artist they just heard. Will Clear Channel stations now only I.D. songs if the labels pay for the service?

"It sounds like extortion to me," says a former programmer. (Clear Channel executives were not available for comment.)

If the practice takes hold, look for competing groups, like Viacom's Infinity Broadcasting, to start hitting up labels for similar commercial buys. "It will throw the whole system into chaos," fears one indie.

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The indies' power illustrates just how crucial radio, especially Top 40, is in generating CD sales. (U.S. consumers bought more than 700 million CDs last year.) Steady touring, an Internet presence, glowing press and MTV help, of course, but mainstream radio play is still the engine that drives the music business.

Yet radio has traditionally been a brood of literally thousands of sometimes spatting siblings, each typically run by a P.D. with high self-regard.

The problem for record companies has always been that there are too many radio stations -- and too many egos -- nationwide for label staffers to keep close tabs on. So they need to hire indies, people with close business relationships in different markets. (Third-party indies have traditionally insulated labels from direct involvement in any payola activity as well.)

Here's how the game is played today:

The reality is, disc jockeys were cut out of music-making decisions at stations many years ago. Virtually all commercial radio airplay is determined by program directors, who typically construct elaborate schedules directing the DJs what to play and when.

Today, thanks to consolidation, even station program directors often get their playlist cues from above -- from general managers, station owners or, in this age of consolidation, regional program directors.

So many indies no longer bother to target the P.D.s. Instead, they go straight to the general managers or owners and cut deals, typically guaranteeing a station in a medium-sized market roughly $75,000 to $100,000 annually in what is termed "promotional support." The station claims that the money goes to buying new station vans, T-shirts or giveaway prizes; in reality, the station spends the cash any way it wants.

That payment makes the indie the station's exclusive point man, the only one (or at least the first one) its programmers will talk to about adding new singles. Once that indie has "claimed" a station, he (there are very few shes in the business) sends out a notice to record companies, letting them know he will invoice them every time the station adds a song to its playlist.

Next Page: More income: "Bill-backs" and "spin maintenance"

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