Capitol Improvements

4/8/1994

To quote Bob Dylan, “…the times they are a-changing.” Over a year ago, The Network Forty predicted the changes that are now affecting the radio and recording industries. Gone are the Parallel Systems, the dependency on station playlists and the dictatorial rules of R&R. Going soon are paper adds, chart manipulation and the way record companies have been doing business with radio.

Record companies are struggling to determine definitive compensation due radio (i.e. promotions) and independent promoters for their work with specific stations. As actual airplay and retail sales have become the true bottom line, record companies search for a benchmark that can be used by everyone. Though all agree that some new method must take the place of the old 7-4-3 Parallel System, defining the compensation package has been difficult.

What radio station are important? How is that importance determined? What factors should be weighed in making final decisions?

Those are some of the questions. The answers vary. But one answer is definitive: record companies will determine the importance of specific radio stations. No longer will R&R dictate the status of stations simply by making them part of its reporting base.

Acknowledging the change is easy Acting on an alternative has taken longer. Although the old Parallel System was unfair and inaccurate, it was an easy way out for record companies. Coming up with an innovative system to reflect the new order is a lot tougher.

Late last year, Arista Sr. VP Promotion Rick Bisceglia quietly moved away from the Parallel System and began categorizing radio stations based on airplay and record sales. Columbia Sr. VP Promotion Burt Baumgartner fired the first broad salvo last month when he innovated a new system of compensation for independent promoters based solely on airplay. Using BDS as a monitor, Columbia began compensating for actual spins, not listings. This system drastically improves on the old, but could leave many non-BDS-monitored stations in limbo. Last week, Atlantic Sr. VP Promotion Andrea Ganis went one step further. Compensation is provided using BDS and The Network Forty’s Plays Per Week for those stations not monitored by BDS. Although each plan varies according to specific records, one thing is common: airplay, not listiings, is the criterion.

All of these systems are innovative, but left unanswered are the questions of how to place importance on particular radio stations and what measures should be used to determine their importance?

Enter Capitol Sr. VP Promotions John Fagot. John commissioned a research report to determine the answers. Capitol researched markets nationwide to find out: (a) The top 100 stations ranked by 12-34 cume. The 12-34 demographic is used because previous research indicates this group is the primary source of record purchases…particularly with new releases. (b) The Current/Recurrent/Gold ratio of these radio stations Radio stations that are Current-based are more important to record companies…particularly in showcasing new releases. (c) The top markets nationwide ranked by actual record sales.

Using this research, John is able to more accurately define the ratio stations that can play an important role in the success of Capitol Records. The same is true for the record industry as a whole.

John is willing to share a good bit of this research Some of the highlights are interesting.

Many in radio believe that success is dependent upon a tight playlist. Recurrents and Golds are often thought to be the key to higher ratings. Although The Network Forty has provided research and insight that shows the raido audience is changing and wants to hear more new music, a lot of programmers cling to the belief that being late on new music is the safest way to go. This may have been an accurate assumption in the past, but current trends indicate that stations on the cutting edge of music programming are achieving greater success than those that are slower to react. Some of the most successful ratio stations in the country are also some of the most Current-based: WBBM Chicago, WPGC Washington, D.C., Power Pig Tampa and WLUM Milwaukee, just to name a few.

Jumping off the pages are the sales stats. One-half of all records sold last year were sold in the top 20 markets. One-half. And it gets more interesting. 81% of all records sold were sold in the top 75 markets. At first glance, it would seem to indicate that if you aren’t programming in one of the top markets, your station’s influence on record sales (and the correlation of your importance to the record industry) is negligible. However, a closer study reveals that, taken as a whole, markets ranked less than 100 comprise 12.38% of total record sales, higher than any other individual market.

Record companies that concentrate exclusively on large markets miss the biggest market of them all. If you are programming in a small market, your influence on record companies depends on your ability to influence record sales. Radio programmers in smaller markets who depend on record companies for promotions (and who doesn’t?) should be developing relationships with retail outlets in their home town right now. Prepare research that documents your station’s ability to influence record sales. In the past, your status with R&R determined your importance to record companes. Now, it’s up to you.

Another interesting facet of the report is found in the sales figures. Many markets outperform their population in record sales. And some do much worse. In almost all cases, markets that are ranked higher in sales than population have two things in common: They are dominated by aggressive Current-based radio stations and/or have colleges located within the ADL. Some of the best? Sacramento ranks 21st in population, but 13th in sales; Las Vegas ranks 91st in population and 42nd in sales; Springfield-Decatur-Champaign ranks 75th and 46th respectively; Austin is 71st and 56th. Others that perform signigicntly better than their population figures are San Diego, Portland, Salt Lake City, Providence and Madison. Conversely, some of the markets who perform poorly with record sales in contrast to population are those with radio stations that aren’t as aggressive or Current-based. The “leaders” in this category are Dallas, ranked 7th in population and only 14th in record sales and Buffalo, ranked 38th in population and only 61st in sales. Other markets that perform under their population figures: Cleveland, Jacksonville, Birmingham, Tulsa, Syracuse and Shreveport.

The most interesting thing about this report is the person who commissioned it. John Fagot is one of hte most respected Sr. VPs of Promotion in the industry. He has also been in the business of promoting records for nearly three decades. It would be easy for him to cling to the way he’s done his job in the past. For John to recognize the changes taking place in our industries and enlist innovative research to define his record company’s goals better is positive proof that Bob Dylan is right.

And am I the only one who recognizes the true, poetic justice in this report? For years, radio has concucted iternal research to determine the fate of records. Now, record companies are using research to determine the importance of radio.

The times are changing. We have a choice to stand pat and continue to be a part of the past. Or we can be bold and become a part of the future. Individuals like John Fagot, Rick Bisceglia, Burt Baumgartner and Andrea Ganis and record companies as a whole are taking charege of their destinies. They are defining the future.

It’s time for radio to do the same.

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