Clear Channel’s Radio Pacts Irk Labels

Radio conglomerate Clear Channel Communications Inc. is pushing the envelope in the murky world of record promotion--and upsetting music executives in the process.

Clear Channel has notified record labels that it has signed new pacts with three independent music promoters and granted them the exclusive right to pitch songs to Clear Channel program directors at its top black music, or “urban,” radio stations.

Those promoters, in turn, have dramatically raised the prices they charge record labels for new songs added to a station’s weekly playlist.

At KHHT-FM in Los Angeles, promotional prices surged 50%, with Clear Channel’s new gatekeepers charging $2,000 for each song added to its weekly playlist. By last week, rates had jumped 20% to 100% at 42 Clear Channel black music stations across the nation after the company signed exclusive deals with promoters Ted Astin, Wes Johnson and Reuben Rodriguez.

The sudden price hikes appear to contradict statements by Clear Channel Chief Executive Mark Mays, who has admonished music executives for wasting money on independent promotion. “I told them, ‘Please, don’t make the payments,’ ” Mays said in an interview this summer. “Why they continue the payments I have no idea.”

Peter Hart, an analyst for the New York-based media watchdog group Fairness and Accuracy in Reporting, accused Mays of “talking out both sides of his mouth.”

“One day he’s boasting about cleaning up a corrupt system. The next day we learn that his company is getting more deeply involved in the practice that he condemns,” Hart said. “The message is clear: Clear Channel is not serious about cracking down on independent [music] promotion but in fact looking to capitalize on it.”

Clear Channel says it has no control over what prices the promoters charge--and receives no percentage of their per-song rates. The broadcast chain earns its money in the form of annual fees by charging Astin, Johnson and Rodriguez about $100,000 and up per year at each station for the exclusive right to pitch songs at its black music stations.

Astin and Johnson declined to comment, and Rodriguez could not be reached.

Pop and Rock Contracts

The radio chain is paid even more at its pop and rock stations, as much as $250,000 annually per station, under a series of deals cut with Tri-State Promotions, Jeff McClusky, Bill McGathy and other promoters, sources say.

“We have decided to set up a system where there are contracts with a limited number of independent promoters because it makes it possible for us to establish controls and oversight to monitor the system,” Mays said in a statement this week. “This also allows us to keep it separate from programming. Decisions on programming are based entirely on research and on data from local markets indicating what listeners want to hear.”

Record executives declined to comment, saying they feared Clear Channel might retaliate by withholding airplay of their artists’ music.

Privately, however, music executives, independent promoters and radio employees contend that behind the scenes Clear Channel has doggedly pursued cutting lucrative promotion pacts at its radio stations as a way to tap more of the millions spent on promotions by record labels.

Clear Channel also recently renewed several deals with music promoters covering about 200 stations in the pop and rock fields. As a result, this year Clear Channel could rake in $15 million to $20 million in fees from its pop, rock and black music station promotion agreements, industry sources say.

Mays defended his position, suggesting that Clear Channel has been “very consistent” regarding its position on independent promotion.

“Independent promoters are being paid significant amounts of money for our proprietary information--our playlists and our research,” Mays said. “If record companies choose to continue spending money with independent promoters, we may not agree that it’s the best business practice on their part, but we’ll participate if we can work within our guidelines.”

Federal law prohibits radio stations from accepting money for playing songs without disclosing that information to listeners. Legislation was proposed recently by Sen. Russell D. Feingold (D-Wis.) to ban independent promotion arrangements. Feingold alleges that current pay-for-play practices violate payola laws.

Clear Channel, the nation’s largest broadcast chain with more than 1,200 radio stations, insists that its foray into independent promotion is legal. Radio One Inc. and other competitors have implemented similar promotion contracts.

In the past, powerful music companies were accused of directly bribing deejays to play songs. To sidestep current payola laws, an independent contractor pays an annual fee to a radio station for the exclusive right to pitch songs to the station’s program director.

The station is not required to play any song pitched by the promoter but agrees to give the independent promoter advance information about which songs the station will add to its weekly playlist. The promoter then sells that information to the labels, collecting a fee for each song added to the playlist.

Shift of Power

The current practice was invented by the music industry to insulate record labels from allegations of payola while still allowing them to influence airplay. Previously, labels paid only promoters whom they believed had the power to manipulate programming in their favor.

But recent broadcast mergers have shifted the power to radio groups, which today have the clout to launch a song simultaneously in scores of markets across the country. In recent years Clear Channel has installed its own team of independent promoters--intermediaries who, labels say, charge higher prices but have less influence over programming.

Clear Channel’s new gatekeepers immediately issued rate cards to record companies, charging $800 to $3,000 per song, depending on the market. Under the arrangement, promotion prices surged 100% in Detroit, 55% in Philadelphia, 45% in Milwaukee and at least 25% in most other cities, music executives said.

Meanwhile, Clear Channel continues to press music companies to purchase programming data through a variety of other in-house ventures.

Under one service called PD Perceptuals, Clear Channel charges labels $5,000 to showcase a song before a panel of its top programming directors. The broadcast chain also sells access to its programmers during radio conventions, charging music acts a fee to perform live in concert before them.