“I support independent promotion—as a service. As in
any business, relationships are valuable.”
——MCA's Craig Lambert


Corporate Radio Fee Hikes, Label Belt-Tightening Spell Trouble for Middlemen
Looks like things are tough all over. As reported this week in the Los Angeles Times, Lenny LyonsTri-State Promotions has given up its deals with five Clear Channel stations in four major markets, including KIIS Los Angeles, Z100 New York, KYLD and KMEL San Francisco and Y100 Miami, saying the firm can no longer afford the fees it had guaranteed Clear Channel for the exclusive right to promote records to them.

The move comes in the wake of Universal Music Group’s decision several months ago to cut its base scale for independent promoters to a maximum of $1,000 per add, while at the same time reducing the number of stations it is willing to pay indies for at all. UMG’s move cut the amount it spends on independent promotion roughly in half.

As a result, middlemen such as Lyons and Tri-State are being caught in—ahem—the middle of a sticky situation: They have promised their stations’ corporate owners a certain amount of money, but as a result of declining sales, a shaky economy and the ever-looming threat of Internet piracy, cash-strapped record labels are no longer willing to pay the premium for station adds they once were, often leaving the indies in a deficit position.

Sources say that under Tri-State’s just-terminated agreements with Clear Channel, the firm would have to gross between $7,500 and $10,000 per week just to break even with those stations. This year, KIIS reportedly has been adding 2.5 records per week, on average. Z100, KYLD, KMEL and Y100 have been adding an average of 3.2, 3.5, 4.4 and 3.5 records per week, respectively. Lyons declined to comment for this story, but he did say he likes our cartoons.

UMG has seen few labels from other groups follow its lead so far—RCA being one notable exception, budgeting no indie money for Kelly Clarkson—but it’s becoming clear that UMG is seeing no impact from its decision to economize apart from saving money: As of last week, the group still could lay claim to half of the 10 most-played Top 40 records and was doing as well or better at all other formats.

In light of such evidence, it could become more difficult for other labels to justify large payments to indies with corporate-level chain deals, but it won’t be for lack of trying: Some indies are reportedly spinning to other companies that UMG labels aren’t adhering to the new policy, but those with knowledge of the situation say that’s fantasy, not fact.

Insiders say that the majority of record companies don’t mind paying independents who have actual relationships with programmers with whom they can discuss the merits of a particular track and make the case for playing it. Indeed, as MCA Sr. VP Pop Promotion Craig Lambert puts it, “I support independent promotion—as a service. As in any business, relationships are valuable.”

The type of arrangement the labels are chafing against is the one pioneered by Jeff McClusky & Associates in the late ’90s as radio rapidly consolidated, whereby the promotion company pays a radio conglomerate for “exclusive access” to pitch songs to some or all of the chain’s stations and gets weekly add information for the purpose of billing the labels—without, in some cases, any actual promotion going on at all. Such deals, in which service to labels takes a back seat to billing, have come to be known as “tollbooth promotion.” And it has become increasingly expensive as the most powerful chains have leveraged higher and higher fees out of indies.

The Tri-State/Clear Channel shakeup comes less than a week after Cox Radio announced it would discontinue all relationships with independents, due to its distaste for a system which Cox CEO Robert Neil told the Times “invites abuse.” Cox’s position stands in direct opposition to that of Clear Channel, which has repeatedly stated, at times almost tauntingly, that as long as independent promoters are willing to pay them, they would consider it found money. Clear Channel COO Mark Mays has even gone so far as to wonder aloud why labels see a need to pay independent promoters at all.

But there’s the rub: With hundreds of stations operating in a given format and dozens of promoters claiming to hold sway over various programmers, it is extremely difficult for heads of promotion at record labels to know who actually can help give their records an edge. In healthier economic times, the traditional method has been to hedge all bets by paying everybody to do their thing. But with money increasingly scarce, labels are exercising greater discretion. However, it’s difficult for a given promotion head to know which indies actually impact airplay in which markets, meaning some hedging is likely to continue.

In the case of Cumulus, an internal “music policy” memo written by Executive VP John Dickey announcing the chain’s exclusive indie relationship with JMA stipulates that indie and programmer shall not cross paths, ever: “There will be no contact from the station level to any representative of JMA,” the memo reads, further directing programmers to hold their adds to “allow JMA the required time to communicate the various adds to the various labels prior to public knowledge of adds.”

“We have total confidence in the system as it’s set up,” Cumulus Chairman/President/CEO Lew Dickey told the Times. “We are comfortable with it.”

Less comfortable is Infinity Broadcasting. Chairman/CEO John Sykes and President of Programming Andy Schuon have decided to let what deals they have with independents expire, reportedly feeling they can get more out of a direct relationship with the labels, whom they consider partners, than they could through middlemen.

Meanwhile, those indies who get results will continue to be viewed as valuable by the labels, insiders say. “If people can do something and have relationships, I’m willing to pay them to help get my records played,” says one label promotion head.

“I know we provide an extremely valuable service,” says indie Skip Bishop, a former programmer and promotion man at RCA and MCA, who had six Cox stations prior to the chain’s policy change. “I’m only in markets where either my staff or I have long-standing relationships. We get hired by labels to help develop records through airplay and advise radio as to which songs are looking like hits.”

And despite Cox’s dramatic move to sever all ties with indies, many continue to stand by the system: “We only started using independent promoters a few years ago,” says Emmis President Rick Cummings. “In fact, we at one time had a ‘no-indie’ policy. We tried it to see if we would ‘grow horns,’ but we didn’t. After Cox’s decision, we went back to those of our market managers who choose to use indies, and they believe value is created for their stations and for the record companies—they like their partners and the way the relationships are working. We see no reason to discontinue these relationships at this time.”

The current state of independent promotion has been an increasingly hot topic among journalists, label and radio execs and lawmakers. In May, ABC News aired a piece on 20/20 featuring Radio One execs Alfred Liggins and Mary Catherine Sneed, who defended the practice of selling “access” against accusations of “legal payola.” That same week, the RIAA and other trade and labor groups issued a “Joint Statement on Current Issues in Radio,” asking, among other things, for the FCC to revise payola regulations—a move some found ironic, given that it was record labels that first developed the indie system. Legislators including Rep. Howard Berman, Rep. John Conyers Jr. and Sen. Russell Feingold have stated their interest in reforming radio promotion.

“We are in the process of putting together a proposal for the FCC,” says RIAA chief Hilary Rosen. “They are our target for policy help. I don’t think Congress will get involved anytime soon.”

— Jon O’Hara, with Todd Hensley, Roy Trakin and Marc Pollack

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