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Sunday, Nov 8, 2009
Dating back to the earliest days of rock 'n' roll, record companies have been trying to win favor at radio stations. The challenge is there have always been too many radio stations nationwide for record company staffers to keep close tabs on. So they hired indies, people with close business relationships in different markets.
Indies were paid to pester programmers, take them to lunch, set them up with concert tickets, and help them land hot bands for exclusive station promotions. Indies were usually paid on a per-project, or per-song basis, earning a flat fee to work the phones on a song's behalf, and then given bonuses depending on how high the song charted. Indies acted as paid lobbyists and labels were grateful for whatever help -- real or imagined -- they provided. Labels were also careful not to make enemies with indies, knowing those same lobbying efforts could be put to use to keep a song off the air if the indies felt crossed.
The promotion system has ebbed and flowed between extremes. On the one hand, legitimate independent contractors have worked as lobbyists on behalf of record companies, schmoozing programmers in hopes of getting acts added to the playlists. During the '90s alt-rock boom, for instance, little known Offspring had indie Mike Jacobs to thank for helping get the band's '94 single "Come Out and Play" a shot on major-market FM radio, which subsequently drove the band to multiplatinum success.
But the network of indies soon evolved into an expensive phalanx of toll collectors -- some one-man shops, others with dozens of employees -- who billed record companies exorbitant fees for very little work. Frustrated labels, which helped concoct the crooked system, couldn't bring themselves to dismantle it for fear that not playing and paying might cost them crucial radio airplay.
"As much as we hated spending the money," says one label executive, "we couldn't have one label saying we're not spending indie money because the other labels will keep spending the money instead. The only way to stop was for the stations to stop taking our checks."
The issue has remained so central to the business because radio still represents the most effective way to sell records. Videos on MTV are nice, four-star reviews can soothe egos, and downloads help spread the word of mouth, but heavy rotation on FM radio is still what separates financially successful acts from struggling ones.
"A lot of great songs never saw the light of day at radio because there was no money behind them," concedes one label source. The examples are almost endless. Pick a favorite band or deserving song that's never been embraced on the FM dial; odds are there was no "push" -- no radio promotion money -- behind it at radio.
And the money connected to indie promotion in recent years was staggering, costing labels $250,000 just to pitch a song, and much more if the song became a hit. When Mercury Nashville crossed country singer Shania Twain over to pop radio in 2001, the label spent $1.5 million on indie promotion alone, according to the label's president. For record companies, indie promotion often cost more than making the actual album or marketing it. Of course, labels turned around and deducted a large portion of those promotion fees from artists' earnings. As Don Henley testified before the Senate Commerce Committee last year, "I know there's payola, because I get billed for it."
Artists are now getting billed less, thanks in part to an ambitious politician. It appears New York Attorney General Eliot Spitzer's recent move to subpoena record companies for all relevant indie promotion e-mails, contracts and correspondences prompted already nervous, and cash-strapped, radio and record companies to hastily retreat from the dubious indie system that was costing labels more than $150 million annually. Spitzer's team isn't talking publicly. But they could be investigating whether labels, indies or stations broke any payola laws, which forbid broadcasters from accepting anything of value in order to get songs played, and not disclosing the quid pro quo to listeners. Or more broadly, the team could be looking at whether artists who can't afford indie fees are being locked off the airwaves, facing restraint of trade.
The decision late last year by radio giant Infinity Broadcasting and its 100-plus music stations to cut ties with indies was just the most recent in a stream of capitulations, as questions of undue, or even illegal, influence hovered around the pay-for-play system.
"Spitzer says I'm going to look into this and everybody's folding like a house of cards," marvels one appreciative label executive. "We needed an outsider to come in and say this is bullshit and this is illegal. If [Spitzer] came out of nowhere and said he was going to investigate, it would have raised some eyebrows with a chuckle; 'Good luck, buddy.' The fact is he's nailed the accounting industry, Enron, and now he's after the insurance company for fraud. This is the real deal."
Looking back, the beginning of the end for indies actually came in June 2002 when radio giant Clear Channel ousted Randy Michaels as the head of its mammoth radio division. A flamboyant manager, and former morning shock jock, Michaels moved aggressively in the wake of late '90s industry consolidation to leverage Clear Channel's huge station roster list of 1,200 stations by pressing record companies to pay indies more and more for airplay. (By 2000, it became virtually impossible to have a pop, rock, country or R&B radio hit without its being played on Clear Channel stations.) By working with just a handful of indies, who in turn dramatically increased their fees to record companies, Michaels and Clear Channel helped drive up dramatically the cost of radio promotion.
"Clear Channel got greedy," says one label promotion veteran. "When Randy Michaels ran the company, he saw the record labels as Chase and Citibank -- he wanted every cent we had. The numbers got crazy. So what happened? The top label guys got together and said enough. They went to [Michaels' boss] and said, 'This is what's going on. It's extortion.' Clear Channel fired Randy Michaels and then got rid of the indies."
That came during the spring of 2003. Yet Clear Channel didn't suddenly sprout a moral conscience. Under increasing pressure from Capitol Hill for allegations that it was abusing its consolidated power, and with more and more legislators openly discussing the need to address the abuses of pay-for-play, Clear Channel announced that it would end all exclusive contracts with indie promoters. The company simply could not afford the bad P.R. of trying to defend the pay-for-play system. "You're not going to get [Clear Channel CEO] Lowry Mays to appear before the Senate trying to defend pay-for-play and make it sound OK," says a record company executive. "It might be legal, but just barely and it's basically indefensible."
Last November it was Viacom-owned Infinity's turn to walk away from indies. As with Clear Channel's 2003 announcement, there's a feeling that politics had more to do with Infinity's move than genuine concern about the ethics of radio programming. "Viacom's corporate business is selling TV advertising and Infinity's just one part of a gigantic company and one that has experienced controversy [with Janet Jackson's Super Bowl halftime show]. I don't think they wanted another drama," says a record company president.
