Site Presented By
Monday, Nov 9, 2009
Indies today don't exactly control what gets played on commercial radio. But they do take credit for -- and get paid for -- what gets played.
Here's how the system works: Indies pay for the right to exclusively represent radio stations. The up-front fee is roughly between $100,000 and $400,000, depending on the size of the market. Once that deal is signed, the indie sends out weekly invoices to record companies for every song added to that station's playlist.
Those invoices add up. Every song added to an FM music playlist comes with a price attached: roughly $800 per station in medium size markets, $1,000 and more in larger markets, up to $5,000 per song.
It costs approximately $250,000 just to launch a single on rock radio today. That doesn't guarantee any sort of success, just that the single will have access to the airwaves. If the song catches on and eventually crosses over to the mainstream Top 40 format, indie costs balloon to more than $1 million.
And that's why labels are increasingly uncomfortable with the system they helped create. Suddenly caught in the middle of severe economic downturn (music sales are down sharply for the first time in two decades), labels simply cannot afford to pay out millions of dollars to indie middlemen who may or may not create hit records.
Label sources suggest they would rather spend their marketing dollars buying radio commercials to directly promote their artists to consumers. But most record company budgets cannot support both large indie promotion and advertising budgets. (Labels can't simply drop indie payments; the unspoken fear is indies would then try to keep the label's acts off the air.)
At the same time, broadcasters, caught in a similar recession (radio advertising was down dramatically last year), need to find ways to generate more revenue, and they're looking increasingly to the record companies and indies to provide stations with a generous source of easy money.
For instance, Clear Channel Communications, the nation's largest radio broadcaster with 1,225 stations, recently charged record companies $35,000 each for the right to have acts perform in front of a room full of Clear Channel programmers at a three-day company conference. Clear Channel reportedly pocketed nearly $1 million from the arrangement.
Even more appealing for large broadcast companies, most of which are publicly owned and under intense pressure to post strong quarterly earnings, are payments from independent promoters.
Take for example, the system Radio One is trying to implement. As the nation's largest black-owned radio group, Radio One owns 65 stations operating in the top 22 markets. Approximately 50 of those 65 stations program new, hit music. (The rest are made of up talk or gospel stations.) Radio One's new exclusive indie, Ventura Media Group, is charging record companies approximately $1,500 for every new song added to a Radio One station playlist. Assuming its active music stations add five new songs each week, which is the industry norm, that's $7,500 per station, multiplied by 50 stations: $375,000 every week in indie fees, or at least $19 million each year paid out by labels for Radio One stations simply doing their job: selecting and playing new music.
"The money is out there. It would be ridiculous not to take advantage of it," says Radio One's chief operating officer, Mary Catherine Sneed. She won't say how much Ventura Media paid for the right to be Radio One's exclusive indie, but if the company does take in $19 million in the next year in promotion fees, industry experts estimate Radio One would pocket roughly $12 million of that.
"My biggest fear is they're doing it just to get bigger piece of the pie, and not to change the system," says Day at the Rap Coalition.
Sneed, however, told the Los Angeles Times that Radio One is trying to clean up urban radio but that record companies were balking at its proposal to use Ventura Media exclusively. She suggested they were hesitant because radio promotion executives at labels get kickbacks with the current system.
Her allegations mirror the ones first aired in a Salon piece last summer. It detailed what industry insiders insist is rampant corruption within the urban and rap radio formats, with illicit payments -- bribes -- flowing freely into the hands of programmers and indies, as well as record company executives who allegedly pocket generous kickbacks.
Those kinds of revelations led to more and more head-shaking inside the music industry. Says the manager, "I try to explain this to people who don't work in the business and they say, 'Stop it, it can't be true.' There's no other business that operates like this. It's unbelievable."
