A Glitch in Billboard’s Sales Chart? : Pop music: Industry officials question the accuracy of SoundScan’s computerized sales data as well as company’s future.

Is Billboard magazine’s revolutionary new pop chart in jeopardy?

Some industry officials say that it is.

Three weeks after Billboard introduced its new ranking system, none of the six major U.S. record distributors have signed up with SoundScan, the research firm that provides the computerized sales data on which the chart is based.

SoundScan officials have acknowledged that the firm’s continued participation in the Billboard charts is dependent on eventually getting the six distributors to subscribe to its high-tech management information service--at a cost of approximately $800,000 a year per firm.

Three of the corporations--CEMA (which distributes Capitol and EMI Records), MCA (MCA, Geffen, Motown) and WEA (Warner Bros., Elektra, Atlantic, Virgin)--told The Times this week that they have decided against purchasing the full management program in its current form.

The issue, they agreed in separate interviews, goes beyond the matter of price to questioning the accuracy of SoundScan’s survey methodology.

Their complaint: SoundScan’s sample of 2,300 record stores doesn’t adequately reflect the national retail sales picture. SoundScan disputes this, insisting that its methods parallel those used in most major industries, including TV, film and grocery chains.

Spokesmen for the remaining three distributors--Sony Music Distribution, Bertelsmann Music Group and PolyGram Distribution Group--said they are still negotiating with SoundScan.

“If SoundScan cannot meet its financial obligations and the company fails, the music industry could be faced with a very critical situation,” MCA Records President Richard Palmese said Wednesday. “And it is my understanding that SoundScan has no takers for its system at all.”

Billboard’s pop album chart is important to the music industry because radio stations, retail stores and concert promoters consult the sales rankings regularly to help them determine which pop acts to push.

Mike Fine, chief executive officer of SoundScan, denied that his company is in immediate financial trouble.

“We have met all of our obligations up to this point and we will make all the payments that are due this month,” Fine said in a phone interview from New York. “The company is not in jeopardy at this point if the record companies don’t sign on.”

Billboard, the music industry’s leading trade magazine, caused an uproar on May 25 when it scrapped its old chart method--which relied on store employee estimates of sales--and began ranking its pop album and country charts from information supplied by SoundScan’s system.

Whether SoundScan survives, Billboard officials stress that they are committed to the new computerized chart formula--rather than the old employee estimate system which many industry observers believed was open to record company manipulation. Companies were said to offer incentives to employees for favoring certain albums in their weekly reports to Billboard.,

Geoff Mayfield, Billboard’s associate director of retail research, said this week that he remains confident of SoundScan’s future.

“At the moment, Billboard has no contingency plan regarding what would happen if SoundScan was unable to sell its services,” Mayfield said. “We firmly believe the chart should be based on a (point-of-sale data) system and remain committed to that concept. But it would be foolish of us to make plans for failure, we make plans for success.”

The SoundScan system--which measures sales every time a clerk runs a record through the bar code scanner at a register--is said to track an estimated 4 million transactions per week in 2,300 retail outlets, nearly 40% of the records sold in the United States.

But the computer network is costly to run, and bills continue to mount.

Last January, SoundScan signed exclusive contracts with many of the nation’s largest retail record chains--including Musicland, Camelot, Record World, Show Industries, Sound Warehouse, Trans World Music Corp. and Handelman--whereby the firm would pay the chains to report their sales information to SoundScan. Payment on those contracts is reportedly due at the end of June. Neither SoundScan nor the chains would reveal the amount of payment.

And in an effort to combat criticism about the limited scope of its statistical sample, SoundScan has pledged to install $3-million worth of bar-code scanner equipment this summer in 300 additional independent, industry-approved record stores across the nation.

But some insiders see the record companies’ early “anti-SoundScan” stance as a negotiating tactic to drive down the annual fee and to force the company to make changes in methodology. If one distributor, say Sony, breaks ranks and signs up, it might pressure other companies to fall in line, fearing Sony was getting a sales advantage by having access to what might be valuable sales information.

“I don’t think they are consciously doing it to bring the price down,” Fine said. “The issue here is change and most people are afraid of change.”

CEMA President Russ Bach would not speculate on SoundScan’s future, but said his company is designing its own in-house computerized sales data network.

“We are not interested in purchasing SoundScan’s current information management system,” Bach said on Wednesday. “The only issue remaining for us now is whether we can obtain raw data from SoundScan at a fair price.”