Eighty years after its invention, radio--a seemingly archaic force in today's advanced technological world--remains the preeminent communication power in one key area: the exposure of music to drive record sales.
Last week's revelation that radio stations were taking kickbacks to add songs to their playlist by Fonovisa, the dominant independent Latin music label in the fastest-growing segment of the $40-billion record business, underscores the desperate lengths to which music companies still go to reach radio listeners.
This morning, hundreds of record executives and radio consultants will gather in Century City for a three-day convention sponsored by trade publication Radio & Records to discuss the challenges ahead for broadcasters as the Internet and other emerging technologies threaten to undermine radio's role as the music industry's primary promotional tool.
Executives who run the record business have already begun to reexamine the hundreds of millions of dollars their companies sink annually into radio promotion. In recent years, several firms have experimented with targeting music fans through print and TV advertising and by creating "lifestyle marketing" street teams to heighten awareness for underground rap and New Age records, which rarely receive radio airplay.
Although no one doubts that radio will continue to play a role in reaching baby boomers who grew up on it, many executives believe the Internet may soon rival radio as a vehicle to reach young consumers. Indeed, information about consumers gathered from music Web sites and chat rooms have helped companies begin compiling databases that could give labels a new avenue of access to tens of millions of shoppers.
"What you have out there now is a whole new generation growing up in front of that screen, with the computer being their primary source of information about everything important to their lives--including music," said Steve Berman, head of marketing and sales at Interscope Records, home to such radio-friendly stars as No Doubt and the Wallflowers. "We're gathering very specific information about their musical tastes and will be able to notify millions of them way in advance about the upcoming release of music by their favorite bands."
In the meantime, however, Interscope and every other record label in the business relies heavily on radio airplay to expose consumers to music by new artists--and fuel record sales. The exposure generated by a radio hit can ratchet up album sales exponentially, transforming unknown acts--such as No Doubt and the Spice Girls--into multimillion-selling pop stars.
But how do record companies ensure that stations play their 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 for playing a specific song without disclosing the payment to the public.
Thirty years after radio corruption scandals rocked the music business--and popularized the term "payola"--the art of promoting records still remains one of the murkiest areas in the record industry.
While the music profession is, for the most part, no longer tainted by allegations involving underworld cash, cocaine and prostitutes, corporations continue to fork over millions of dollars each year to a tiny clique of independent consultants who pay annual lump sums to key stations, sponsor contests with large prizes for programmers, publish trade tip sheets and hand out freebies.
These consultants contend they can influence radio airplay, though how they can do so is unclear since it is illegal to trade money or gifts for airplay. But most record company heads are so insecure that they apparently believe it would be impossible to compete for radio airplay without them.
And who can blame them? It is becoming increasingly difficult to determine just who is setting the agenda these days at radio: the program directors or the advertising sales managers.
Once considered the heartbeat of pop music, radio has largely fragmented into narrow radio formats under the ownership of conglomerates that have to deliver quarterly results. Recent changes in federal rules allow corporations to own more stations per city than ever before. Some critics believe that the reduced competition encourages radio programmers to take fewer chances on new artists.
Over the last few months, broadcasters have tried to tap into potential new revenue streams with a controversial but legal form of programming called "pay-for-play." Under this infomercial-like practice, radio stations bill record companies for airplay but notify listeners at the time of broadcast that the song is paid for. Some radio stations have even begun to charge record companies simply to announce the names of the songs they play.
Oddly enough, many record executives are privately embracing radio's new pay-for-play policies. The new practice, they say, could open the door on a future where companies have more direct control over what actually gets played on the radio. It could also help them save money by eliminating the middleman from the current radio promotion equation.
But independent record promoters contend that the impact pay-for-play will have on the broadcast business is negligible. Jeff McClusky, whose Chicago-based firm has dominated the independent promotion market for the last decade, predicted that the new infomercial technique will be used primarily as a test-marketing device, with only a handful of pay-to-play selections on a daily basis per station.
"There will be a very limited availability for pay-to-play slots that are cost-effective for record companies--and indies like us will play a key role in coordinating it," McClusky said. "Radio stations are not going to compromise their programming. Pay-to-play is not going to replace independent promotion. It will never happen. I guarantee you that radio will continue to play a vital role in the future of the music business."