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THE
REAL DEAL (the truth about the music industry)
by Jeriko One, written in 2002
"The music business is a cruel and shallow
money trench,
a long plastic hallway where thieves and pimps run free,
and good men die like dogs. There's also a negative side."
- Hunter S. Thompson
The truth is that big business controls the types of music and artists that
get exposure and become popular. The record industry is a $14 billion dollar
business. The five major record labels; Sony, Universal, BMG, EMI and Time Warner
dominate 85% of the market when it comes to sales of Compact Discs. Leaving
only 15% for the hundreds of independent record labels and thousands of artists
out there. And when indies get too big or an artist starts making noise these
major companies usually pick up the artist or label. This way they control the
artist/label, get a percentage of the sales and keep competition to a minimum.
The Big Payoff (radio payola)
Ever wonder why you hear the same songs on the radio all the time? It's because
major record companies are paying radio stations thousands of dollars to play
their records! That's why you rarely, if ever, hear independent music on commercial
radio. Most people don't know that virtually all the pop and rock songs they
hear on the radio have been paid for by the major record companies. The record
labels pay millions of dollars a year to middlemen (independent radio promoters),
referred to as "indies," who in turn pass on some of that money to
radio stations (they get a portion too), which accordingly play what the promoters
ask/tell them to. In exchange for paying the stations an annual promotion budget
($100,000 for a medium-size market), the indie becomes the station's exclusive
indie and gets paid by the record companies every time that station adds a new
song.
Launching a single at rock radio can cost between $100,000 and $250,000. If
the song's a hit and gets played at hundreds of stations across the country
(with added charges for multiple plays a day) the costs can skyrocket enormously.
Mercury Nashville president Luke Lewis told attendees at a music conference
that his label spent more than $1.5 million on promotion for a Shania Twain
single that crossed over to pop radio!
According to payola laws passed by Congress in 1960, it's a crime for a station
employee to accept payment for playing a song if the station fails to notify
listeners about the financial arrangement. That's partially the reason major
record labels use huge indie promotion companies like Jeff McClusky and Associates
and Tri State Promotions and Marketing, if shit ever happens the promoters will
take the fall for it. But no one wants to rock the boat so everyone in the industry
keeps their mouth shut and indies make tons of money for basically being nothing
more than pay-off people. Overnighted packages stuffed with cash are shipped
off to recipients with phony names, American Express money orders made out to
programmers and sent to home addresses, travel and vacation packages... all
of this is being used by major record labels and independent radio promoters
to buy airplay of their songs on the radio. New and independent artists have
no chance to receive airplay on radio and listeners are bombarded with the same
music hour after hour.
Who pays for all of this? The artist. Most record companies recoup their costs
for independent promotion from the artist's CD royalties - which of course would
not be as high if they did not receive radio airplay. And, ironically enough,
the radio stations pay as well, since money that might be used for promotions
to build a larger audience is instead diverted into radio programmers' personal
bank accounts.
Big Fish Eat Little Fish (monopoly)
There are three companies that own most the radio stations in the US - EMMIS,
Radio One and Clear Channel. Over the past two years the Clear Channel company
has been on an acquisition binge, spending almost $30 billion on buying radio
stations, concert venues and advertising companies. The company is building
a "monopolistic multimedia empire" that has decreased competition,
reduced consumer choice, and driven up ticket prices for concerts.
Prior to the Telecommunications Act of 1996, a radio company could only own
40 stations nationwide and only four in a particular market. Since that has
changed Clear Channel now owns 1,170 radio stations nationwide! One out of every
ten radio stations across the United States broadcasts under the Clear Channels
banner and the companys approximate 1,170 stations bill a full 20% of
total industry revenue. Clear Channel broadcasts in every top ten market and
in 47 of the top 50. These stations take to the airwaves across all 50 states,
in almost every major market, reaching nearly every demographic. Clear Channel
stations broadcast to over 110 million listeners every week.
Clear Channel also acquired SFX Entertainment, the worlds largest promoter
and producer of live entertainment events, including concerts, theater and sporting
events. Clear Channel now owns 135 venues, producing 26,000 shows last year
(attended by 62 million people) - 70% of the total "live concert"
market! Buying entertainment giant SFX cost Clear Channel $4.4 billion, making
it instantly the nation's biggest promoter with $2 billion in live-event revenue
a year.
Clear Channel Outdoor owns over half a million outdoor displays (770,000 billboards)
around the world. This gives them and their customers the ability to, as they
state on the Clear Channel website "reach over half of the entire U.S.
population and over 75% of the entire U.S. Hispanic population". Outdoor
is more than just billboards, other products they provide include; bulletins,
posters, street furniture, airport displays, convenience store posters, mall
displays, mass transit displays and mobile ads.
Now there's rumors that Clear Channel wants to start their own record label...
hmmm. Think about it. They can play their artists on their radio stations, tour
them in their venues and advertise them on their billboards.
What can you do? Support college & non-profit radio stations in your local
area. These independent radio stations program alternative music as well as
specialty shows (hip-hop, jazz, electronica etc.). Also support your local independent
bars & clubs.
Product Placement (retail co-ops)
Isn't it great when you can buy your favorite artist or a new CD on sale at
the record store. Ever notice those special displays (called endcaps) at the
entrance, window or at a prime location in a large record chain store. Guess
what? It's not the store that is putting it on sale, record companies have to
pay to have it on sale in the store. This is what is called a Retail Co-Op and
it works like this. For example if a label wants to put one of it's new CD's
on sale in a 'un-named' chain store they would have to pay about $3,000 to have
it's CD in 100 of its' stores. In exchange for the $3,000 the Chain store would
bring in around 1,300 units and give them good placement in the stores, put
them on sale and feature them in their listening stations in those 100 stores
for one month. There are many different Co-Op programs with independent and
major chain stores and they can be very expensive. There are a few problems
with this system. First, for the record label it does not guarantee that the
CD's the store brought in will sell. And since stores do not 'buy" but
take product on 'consignment' it is all 100% returnable (see Retail Returns
below). Second, major record labels spend so much money on Retail Co-Ops so
that stores bring their product that stores aren't left with much money in their
monthly budget to bring in independent music.
the big "R" (retail returns)
Most people think that a 'return' means that someone returned a CD to a record
store because of a defect. That is called a return but in the record business
'returns' means something else - death. Music stores do not buy CD's and then
sell them. They take CD's, sell what they can and return the rest - only paying
for what sold. And there usually isn't a time frame so a company can return
CD's to a label/distributor even a year or more later, usually with cracked
jewel cases and all stickered up. The problem with this is record stores/chain
stores can (and do) over-order a release because they can always return it.
Bomb Hip-Hop spent money with one chain store on a Retail Co-Op for a new release
and a few months later the chain store returned 88% of the CD's! Bomb Hip-Hop
ended up being gaffled by the chain store and spent a lot of money it really
didn't need to. The distributor made money, the retailer made money and Bomb
Hip-Hop lost money from the program. Returns can kill any record label.
Too Greedy (price gouging)
Major record labels and retail chains stores have become too greedy by charging
$18-19 for a CD that usually doesn't have more than 3 good songs on it. Universal
priced Ja Rule's album Pain Is Love with a sticker price of $19.98! But it is
not always the record label overcharging. In the past Bomb Hip-Hop has found
it's releases that have a suggested retail price of $16.98 being sold for $18.98
in retail chain stores. The price to the store is based on the suggested retail
price. For example a $16.98 list price CD is sold to stores for $11 per loose
CD or $10.79 per CD by the box (usually 30 CD's in a box). These chain stores
that price the CD at $18.98 will probably not sell very many because it is priced
to high for underground hip-hop and/or a new artist. These stores do not care
because in the end whatever they took is 100% returnable.
In Conclusion (the end)
There are approximately 27,000 music titles released every year. Of the 7,000
"new" titles released every year by major labels less than 10% are
profitable. Major record labels sign only what they hope will sell, jumping
on the latest trend and flooding the market with sound-alikes. Everything radio
and video shows play sound and look like they came off an assembly line. Major
record companies focus on radio-friendly and videogenic acts and unfortunately
exclude new and experimental artists and genres of music. Consumers have become
lazy and in turn are easily brainwashed by what they hear on the radio, see
on tv and read in magazines. People need to be more educated and take a pro-active
approach to music. Seek out new artists and new types of music, don't let big
business influence and control what you think is good music or what you purchase.
Take what you have just read and inform others of what you have learned - each
one teach one. Much respect to all starving artists and independent companies,
you are not forgotten and you are appreciated. Keep what you're doing and have
fun making music.
A few book suggestions for reading
1. HIT MEN by Fredric Dannen
2. LIFE AND DEF by Russell Simmons with Nelson George
3. OFF THE CHARTS by Bruce Haring
4. BLACK VINYL WHITE POWDER by Simon Napier-Bell
5. LAST NIGHT A DJ SAVED MY LIFE by Bill Brewster and Frank Broughton
6. LOSING MY VIRGINITY by Richard Branson
7. THE RISE AND RISE OF DAVID GEFFEN by Stephen Singular
8. BAD BOY by Ronin Ro