Promoting Music: Pay to Play?

Bimbos’ nightclub in San Francisco was packed as soul singer D’Angelo took the stage.

The New York entertainer’s debut single, “Brown Sugar,” was already a hit on the East Coast. But his record company, EMI Music, was having trouble getting the song played on pop radio in California.

By the time D’Angelo launched into “Brown Sugar” one night last summer, Bimbos was swarming with dozens of West Coast radio programmers--all of whom had been flown in with their dates at EMI’s expense.

The company was banking on the idea that the programmers, wined and dined and booked overnight into upscale hotels, might play the song for their listeners after they saw D’Angelo perform.

The gamble paid off. Two West Coast stations added “Brown Sugar” to their playlists the next week, and others followed.

“Was it worth it to spend the money to fly all those programmers in? Absolutely!” said Kedar Massenburg, the manager of D’Angelo, whose debut album has sold 400,000 copies in the United States since its July release. “We saw a substantial increase in radio airplay immediately after the show.” (Representatives for D’Angelo and EMI refused to disclose how much was spent on the promotion.)

Thirty years after radio corruption scandals rocked the music business--and popularized the term “payola”--record companies are still engaged in the mysterious, multimillion-dollar practice of trying to influence which songs are played on the radio.

The music promotion profession is, for the most part, no longer tainted by allegations involving underworld cash, cocaine and prostitutes. However, a coterie of independent consultants has quietly sprung up to dangle money, stereos, luxury cars and exotic vacations before station personnel.

“Promotion is alive and well--and as controversial as ever,” says Ed Bicknell, manager of the Grammy-winning rock group Dire Straits. “One man’s consultantcy fee is another man’s kickback. Promotion is still a very murky business and up until recently record companies have just put up with it as a necessary evil.”

Unlike other businesses, including film distributors, record companies rarely target the general consumer directly through print and TV advertising. What makes people buy CDs, music company executives believe, is hearing songs played on the radio.

But how do you make sure that stations play your music without violating payola laws?

While it is not illegal for a station to take money in exchange for playing a song, it is illegal to accept money or gratuities for playing a specific song without disclosing the payment to the public. But record companies want listeners to believe stations play their songs because they are popular, not because they are paid advertisements. So the firms have gone to great lengths to avoid on-air identification tags.

To accomplish this, executives in the $12-billion record industry cultivate an inventive, powerful group of middlemen who devise strategies to influence the broadcasters who decide which of more than 5,000 songs offered will be played in the roughly 250 spots per station each year.

In some cases these strategies are “legally cloudy,” according to a Justice Department official, and in others it’s unclear what they accomplish.

Yet record executives, a notoriously insecure group, have long operated under the assumption that these consultants can influence a song’s success not only by getting it added to a station’s playlist, but by keeping it off. More than one-quarter of the $200 million spent annually on promotion is paid to outside contractors and industry tipsheets for what some record chiefs privately refer to as “hush” or “insecurity” money.

Nearly five dozen music industry sources were interviewed for this story, but most declined to be identified for fear of being blackballed by the promoters.

The methods employed by consultants include paying annual lump sums to key stations, sponsoring contests with large prizes for programmers, publishing trade tipsheets and handing out freebies.

“As far as I’m concerned, what’s going on now is just a case of putting the old wine in new bottles,” said Los Angeles attorney Marvin Rudnick, a former government prosecutor who investigated payola. “The record companies can call it whatever they want to, but if somebody is exchanging money or gratuities for radio airplay, it’s payola.”

Industry sources say it’s not as simple as that. Current practices and methods of payment are more subtle than a direct exchange of fees for airplay--and have yet to be challenged by the government.

There are still occasional accusations of illegal conduct. In November, a former promotions assistant filed a wrongful-termination suit against Maverick Records and accused senior executives of providing programmers with prostitutes and expensive gifts in exchange for airplay. Executives at the firm, co-owned by Madonna and the Warner Music Group, denied the allegations. The suit is pending.

But industry analysts and executives almost universally say the corrupt payola practices that destroyed the career of disc jockey Alan Freed in 1960 exist only rarely today. Freed was one of several well-known DJs accused of taking money for playing records--triggering a government investigation of the record and radio industries.

Some of the nation’s biggest stations prohibit employees from accepting perks from record companies or doing business with independent promoters. Infinity Broadcasting Corp., which owns KROQ-FM--the most popular rock station in Southern California--and Shamrock Broadcasting Inc., which owns New York’s Z-100, both ban independent promoters.

“My policy is that I don’t allow any of our employees to accept trips from record companies or utilize the services of independent record promoters,” said Steve Kingston, director of operations and programming at Z-100, the nation’s top-rated station. “The reason: I don’t want our listeners thinking that this radio station is making any decision based on a conflict of interest.”

The modern promotion era was ushered in after 1986, when an NBC news report alleged that key promoters associated with Mafia figures and offered payola to radio programmers in the form of cash, drugs and prostitutes. The scandal triggered grand jury investigations across the nation and led to a 57-count indictment against Los Angeles independent promotion kingpin Joe Isgro.

Operating before the advent of automated radio monitoring systems, Isgro and eight other key independent record promoters allegedly capitalized on the fact that record companies had trouble knowing whether songs added on paper to a station’s playlist were actually played--and in many instances, they weren’t. The industry paid these powerful promoters a collective $60 million a year to ensure airplay for songs.

Isgro was indicted for payola and 56 other felony counts, including racketeering and conspiracy to distribute cocaine. The case against him--which has cost the government an estimated $10 million--is expected to be resolved later this month with Isgro pleading guilty to a relatively minor tax offense.

‘Partners in Success’

One practice raising eyebrows today was invented by Jeff McCluskey, whose Chicago-based firm has dominated the independent promotion market since Isgro was indicted in 1989. McCluskey is paid by all six major record conglomerates and said he maintains “close relationships” with more than 60 broadcast outlets.

The 42-year-old entrepreneur, who executives say is the most plugged-in promotion consultant in the business, sidesteps payola laws by providing stations with annual budgets. Participating stations, many of which are strapped for cash, can receive from $15,000 to $100,000 a year from McCluskey or other promoters.

Under this arrangement, broadcasters are not obligated to play any record McCluskey promotes, but agree to provide him with exclusive access to their program directors. The hope for record companies is that McCluskey can influence which songs they might add each week.

These relationships bolster his influence in the music industry and the broadcast world.

McCluskey--who assures broadcasters that the procedure has been approved by his lawyer, a former Federal Communications Commission attorney--dismisses the suggestion that his innovation is a new form of payola.

“That’s ridiculous,” said McCluskey, whose company generates about $6 million in annual revenues. “We aren’t looked upon as just another record hawker trying to give something away in order to get a particular record on the air. We build relationships. The budgetary investment allows us to become partners in radio stations’ success.”

About a dozen promoters have followed McCluskey’s lead, with some entering into written agreements that go to great lengths to distance stations from any appearance of impropriety. More than 100 key stations accept annual funding from independent promoters.

“On the face of it, there may be nothing illegal about a radio station participating in such an arrangement, but you have to ask yourself, why would a promoter provide a budget unless there was a quid pro quo?” said Charles Kelly, chief of the enforcement division at the Federal Communications Commission, which regulates broadcasters.

On-Air Promotions

Record company promotion staffs shower broadcast outlets with vacations as well as choice tickets to such events as the Super Bowl and the Grammys. Stations also receive free stereos, computers, washing machines and millions of dollars’ worth of CDs each year from record companies.

Charles Koppelman, chairman of EMI Records Group North America, the company that flew radio executives to San Francisco for the D’Angelo concert, said: “When someone witnesses the performance of a great artist firsthand, it’s the best promotion there is--no different than what happens at trade shows in other industries, or on Wall Street, where companies fly analysts in all the time.”

Some stations refuse to even consider airing a new song unless artists will agree to make concert appearances or the companies provide contest giveaways, according to record company sources.

While it’s not illegal to accept perks to give away as on-air promotions, some broadcasters keep the promotional items or sell them for profit, sources said.

“If these arrangements are actually just facades to funnel money to influence stations to play songs on the air that would not be added otherwise, it would be a violation of the payola statute,” said Drew Pitt, an assistant U.S. attorney who worked on the Isgro case. “These practices fall into a legally cloudy area.”

At some stations, programmers can win luxury cars and cash simply by predicting which songs will be hits in contests staged by Jonas Cash, who runs Active Industry Research, a Washington-based consulting firm.

Cash charges each record company as much as $7,500 to enter a song in his competition as well as an additional $7,500 for “follow-up”--in which he queries contestants for feedback about the song on a weekly basis. Each winner gets a new BMW. Sources said Cash’s firm grosses about $10 million annually.

Critics say the contests allow Cash to gain access to major stations--including Z-100 and KROQ--whose corporate policies ban contact with independent promoters. The contests are also criticized because Cash has a financial stake in Monitor, a weekly magazine that publishes radio airplay statistics.

Cash said his company provides a “legitimate and valuable service” similar to that of preview houses that test-market movies--a view supported by several record executives and station general managers.

Cash, whose firm plays about two dozen songs for 150 programmers each week, said the FCC’s mass media bureau chief 13 years ago assured him that “what we do is not payola. Our competition cannot be fixed. While there is certainly a promotional value to what we do, we are not in the independent promotion business.”

Reliance on Tipsheets

Tipsheets are weekly trade magazines run by former independent promoters that feature industry gossip and data designed to alert stations and record companies to new trends. Tipsheets are not sold at newsstands and are read primarily by employees of stations and labels. They charge music firms fees to hype new releases.

In a business where promotion executives are frequently replaced, record chiefs and artists’ managers rely on tipsheets to supplement their in-house promotion efforts.

Although readership and subscription rates for the six leading tipsheets have not grown in years, expenditures on tipsheets and tipsheet consultants continue to escalate and could cost record companies more than $30 million this year, sources said.

Executives said they were unwilling to risk jeopardizing a costly new recording by withholding what they called “insecurity” money from tipsheets. The concern, executives said, is that a new album--as well as the company that releases it--could become the target of a smear campaign that could prevent an artist from getting airplay.

Tipsheet owners said the allegations were ludicrous.

But even if some record executives privately doubt the value of tipsheets, some tipsheet operators are perceived as power brokers who can help them advance up the corporate ladder.

“In some cases, the tipsheet operator opens a door for an executive early in his career or maybe even plays a part in helping him land his big job,” said one record chief. “So the guy feels obligated to return a favor and throws a bunch of business in the tipsheet’s direction. Once a company gets started on that track, it’s hard to stop.”

The most successful tipsheet is Hits, which is owned by former Los Angeles independent promoters Dennis Lavinthal and Lenny Beer. They also earn considerable income from the major record firms for consulting on marketing and promotion. Several artists’ managers said they trust Lavinthal and Beer’s expertise in the promotion field more than record executives.

Hits dominates the tipsheet market primarily because of its connections to top executives who sometimes feed the publication’s widely read rumor column with the hottest industry gossip. The Sherman Oaks firm grosses more than $10 million a year.

Some record executives put little stake in the Hits’ charts and they contend that much of what the magazine prints is designed to flatter current or potential clients--or skewer those who cut back on advertising.

Beer disagrees: “Our major value in the marketplace is that we talk to the decision makers at radio, retail and at the record companies. We try to ascertain which songs are real hits and spread the word up and down the line. We’re about hits, not just hype.”

High-Tech Advances

Sweeping changes may be ahead in the way record companies promote and market their music. Technology has reduced the value of information offered by tipsheets and other consultants.

Broadcast Data Systems, a high-tech airplay tracking system in 126 of the top radio markets, monitors how many times and at what times of day a station plays a song. And SoundScan now provides instant reports on how many albums are being sold based on computerized reporting from major retailers.

These breakthroughs make it possible for companies to know with certainty which records are played on the radio and how many are sold in stores. As a result, some firms are asking what they get from independent promoters.

“The game is up for promoters and trade journal owners who are selling anything other than quantifiable data,” said Joe Wallace, vice president and general manager of Broadcast Data Systems. “In the future, record companies are going to pay for one thing and one thing only: legitimate, objective information.”

The success of tiny independents such as Epitaph Records, which sold almost 8 million albums from punk rock act Offspring without a promotion staff, has also made record firms reassess their approaches.

Indeed, some companies are threatening to withhold payment from independent promoters who cannot substantiate airplay.

“We’re at that point in the movie when Dorothy pulled back the curtain on the Wizard of Oz,” says one record chief. “The industry is finally waking up to the fact that some of these promotion tactics aren’t simply problematic on an ethical or legal level. By and large, they are also a huge waste of money.”