Is This Any Way To Run An Industry?: There's a terrific article in the 6/10 Wall Street Journal about the inner machinations of the music industry. Since it's subscription only, I can't link it up, but I'll quote from it liberally.

This week, 27 pop-radio programmers from Clear Channel Communications Inc. will gather in Los Angeles -- a seemingly priceless opportunity for record labels looking to promote new albums to influential radio executives.

But access to the Clear Channel programmers actually comes with a price tag: about $40,000, the amount music companies pay to be sponsors of the event's lunch or evening cocktails. In return, they will get to showcase their music and receive feedback from the programmers.

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Currently, concern about the issue is in part being fueled by the downturn in the music business. Record companies have been forced to try to contain promotional costs that they say have risen sharply. "The costs are so excessive," says Charles Goldstuck, president and chief operating officer of J Records, a joint venture with Bertelsmann AG's BMG. "With the overall industry revenue base declining, whether the industry likes it or not, something has to give."

To compete for a limited number of open slots on pop radio, labels say they typically pay independent promoters from $200,000 to $300,000 per song, and occasionally more than $1 million. Labels give promoters from $500 to $2,000, depending on the format, each time a station adds a particular song to its playlist for a given week. These costs have risen as the radio industry has consolidated, music companies say. It is getting harder for them to influence playlists, in part because fewer programmers are deciding which songs get "spins" on the air.

Radio and record companies "need to sit down and get together to find better ways to do business -- kind of like Pakistan and India need to do," says Bill Scull, president of Tri-State Promotions, of Cincinnati. His closely held company is one of the nation's most influential independent promoters, along with Jeff McClusky & Associates, a Chicago company that has locked up exclusive access to several programmers at big radio companies. "Because of the size of the radio groups, the power has shifted and record companies now feel like they're not getting full value," Mr. Scull adds.

So, as I read it, here's the set-up: Clear Channel (and lesser radio station groups) make agreements with these independent promoters to give these promoters access to their stations. A fee goes to the radio group (e.g. Clear Channel) for this. Record company comes along looking for airplay from Clear Channel, et.al. Record Company must "hire" the specific independent promoter that the radio group has designated. Basically, this is a slightly sanitized version of payola.

In the 1950s and 1960s, the practice of "payola" -- undisclosed cash payments to individuals in exchange for radio play -- became a routine part of the music business, culminating in a series of scandals followed by laws banning such illicit payments. If an individual radio employee is paid in such an illicit trade, it's payola, a criminal violation. If a station owner takes money in exchange for airplay without disclosing it on the air, it's a civil infraction that can result in a fine from the FCC.

The music industry has adapted, finding less direct methods. The labels found they could effectively lobby stations using independent promoters, who often have long-term relationships with radio executives and are supposed to have specialized knowledge of local markets that help them pitch the songs most likely to be hits.

So the practice of "hiring" independent promoters was really started by the record companies, but because of all the consolidation in the radio business (read: Clear Channel), the scarcity of free-thinking radio stations shifted the balance of power from the record companies to radio. The net result is a smaller and smaller cadre of marketing execs determining what music gets heard.

Now I don't believe that there is any evil or immoral intent or activity. It's just stupid. How can you possibly have a good understanding of current popular musical tastes with just a few people running around doing focus groups? You can't. Music choice gets narrower and narrower; audiences get smaller and smaller; losses get bigger and wider.

In the long run, technology will overcome all these shortcomings and render irrelevant the big players who can't adapt. It's just a question of how long the lobbying and lawsuits will let industry bigwigs keep their phoney-baloney jobs.