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So Sick

Biz bites the kids that feed it as radio battles everybody

The music industry's latest payola scandal still occupies New York attorney general Eliot Spitzer. But this time around he is honing his sights on radio operators accepting bribes instead of labels doling them out, which is why he chose to sue Entercom, a Pennsylvania company that owns more than 100 stations. Spitzer not only accused the company of accepting money, but he also alleged that Entercom asked for cash from the labels, according to a March 8 press release from his office. And it seems that, since radio station executives left behind e-mail evidence, they won't be able to blame their underlings. In one e-mail exchange, a program director complained about previewing certain CDs to generate payola. An executive replied: "These are not optional. They come from corporate and generate millions of dollars for Entercom." In the end, Entercom will likely agree to pay fines and promise reforms, as Warner Music and Sony BMG did with earlier payola disputes.

Entercom isn't the only radio corporation making headlines. Clear Channel recently sued XM Satellite Radio, demanding XM allow the radio behemoth to air commercials on the four XM stations it programs. XM wanted nothing of the sort—for the past two years it has touted itself as having 69 advertising-free music channels—but an arbiter ruled in Clear Channel's favor. It would seem like a bigger deal if XM didn't have 163 channels, meaning it can already advertise on 94 that mostly specialize in sports or news. Still, XM plans to add four new music-only stations to its roster, a representative told the Voice in an e-mail, keeping its total at 69.

Without a doubt, though, it's still FM radio that holds the music-launching reins. Therefore, it came as a surprise when in early March Billboard's three top-selling albums were made for children of the age targeted by AM's Radio Disney. The top slots went to High School Musical, Kidz Bop 9, and Sing-A-Longs and Lullabies for the Film Curious George.With tykes positioning themselves as consumers, record executives are taking notice. "I wouldn't be surprised to see a dozen kids-spirited albums," Universal Records president Monte Lippman told the Times.

First-week phenom Ne-Yo
photo: Phil Knott
First-week phenom Ne-Yo

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    And kids don't just buy CDs; they also download—almost every track from High School Musicalhit Billboard's Hot 100 on legal downloads alone.

    But kids who download illegally are turning their parents into potential lawsuit targets. When Terry McBride, owner of Canada's Nettwerk One, learned the RIAA pressed charges against a Texas man whose daughter downloaded a single by Nettwerk One artist Avril Lavigne, he leapt into the fray and took on the family's legal fees. "I see this [lawsuit] as a knee-jerk reaction," he told the Voice. McBride, who has no expectation of winning the case, believes suing customers damages the music industry's future; person-to-person file sharing, he feels, is shaping up to be a major distribution route.

    In an attempt to peg down purchasing patterns, marketing firm Ipsos, the Associated Press, and Rolling Stone polled 1,000 people on their music consumption. Unsurprisingly, buying CDs remains the most popular way to acquire music. Seventy-three percent do that, compared to 15 percent who shop at legal online music stores and 8 percent who share files illegally. But, no shock, nearly three-fourths of the fans polled still find CDs too expensive. And one-third believe that overall music sales are slumping because of people copying tunes illegally. Did they think the same about mixed tapes?

    Some in the music biz are working with the digital trend. Island Def Jam refused to release Ne-Yo's single "So Sick" to online music stores before his CD, In My Own Words, came out in late February. As the label hoped, consumers' pent-up demand resulted in 301,000 first-week album sales, according to Nielsen SoundScan. And when "So Sick" finally did hit online shops, it sold 120,000 copies the first week.

    Nettwerk One's McBride has his own ideas of how the music business should work. He believes music should be valued like a utility—water, specifically—instead of as a product. At the same time, he says the market should regulate music prices. But in the U.S. at least, water isn't totally regulated by the markets, and any company wanting to raise the water price needs permission from an advisory board. At least McBride has an idea. Dare to dream.

     
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