Deconstructing Pop Culture

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Billboard 200 – Construct Invalidity

September 15th, 2010 by David Kronemyer · 3 Comments

For some time Billboard Magazine published a “Top 200” chart, which purported to identify the 200 best-selling records in the country. It used a variety of methodologies over time to comprise this data. Initially it relied on “store reports” from a limited (“small-n”) sample of retail record stores, together with feedback from local radio stations, to determine what records were popular in different markets. Record companies relied on the Billboard charts as a proxy for actual record sales. Each record company had a staff of several persons – typically in its accounting department – tracking both its own and competitor activity. The results of these analyses were used to allocate economically scarce marketing and promotional resources, and also to evaluate market share.

Looking back on the early 1970s the structure of the domestic record business seems almost quaint. Many labels were small and independently owned, typically distributing records as best they could through an ad-hoc consortium of local and regional intermediaries. Record stores predominantly were “mom-and-pops” (this does not mean they necessarily were owned or operated by mothers and fathers; rather it is a term of art for non-franchised, non-corporate, one-location, individually-owned stores). Radio stations also typically were locally-owned. There was some national account advertising, but local advertisers predominated. While radio stations were formatted along genre-specific lines, they had greater flexibility to identify and play particular records in response to local market preferences. Typically there was one concert promoter in each city, who booked all of the big acts into whatever venues were available.

There came a time in the mid to late-1970s when this changed dramatically. Record labels began consolidating into larger distribution groups such as WEA Corp. (Warner Bros. – Elektra – Asylum). As a counterpart, record retail also began to consolidate. Large “central warehouse retailers” emerged, such as Musicland Group and TransWorld Entertainment. Rack-jobbers such as Handleman and Lieberman basically ran the in-store record departments for large “black-box” retailers such as K-Mart and Sears. “Category-killer” stores such as Tower boldly proclaimed to stock every record ever made, or at least those currently available in catalog. While some of them remained influential as trend-setters or taste-makers, the over-all influence of mom-and-pop stores waned. Record companies dropped them as separate accounts, requiring them instead to purchase inventory at a mark-up from consolidators known as “one-stops.” Commensurately, radio stations began to consolidate into large national groups. Playlists became more regimented in order to attract specific types of consumers, targeted by national advertisers. Concert promotion began to consolidate into large regional firms, able to guarantee acts large advances and book them efficiently into chains of venues they controlled.

Billboard was slow to respond to these developments. Eventually it recognized different genres of music had different product life cycle characteristics, so it established separate charts to track them. It implemented various reforms to its data-collection process. By and large, however, these were superficial. As the record business became more corporatized (and more lucrative, with the advent of CDs), record companies became incentivized to manipulate the Billboard charts. This typically was done for a single purpose: to create the appearance of sales activity, when in fact the actual volume of records sold was less. This appearance of sales activity in turn palliated the management of artists under contract with the label; and justified disproportionate claims on marketing and promotional resources, which still had to be allocated as an economic commodity among competing claimants. The old store-reporting and station-reporting call-out techniques were easy to game, particularly with the rise of independent promotion and payola-type kickbacks in the mid to late-1980s.

Retail reporting technology continued to evolve however with the creation of scanners, bar-codes and computers to store and analyze the resulting data. Suddenly it became possible to track consumer purchasing behavior in a way that corresponded more accurately to actual purchases. A company called SoundScan was able to navigate the complex politics between record retailers and record distributors and introduced retail tracking technology to the record business in the early 1990s. Initially it too relied on a small-n sample size, however this continued to increase, and SoundScan continued to refine its algorithms to arrive at a better estimate of the overall N population. Record companies finally were able to discern what actually was selling in a particular ADI (“area of dominant influence” – a term for a retail marketing area). It also became possible to construct far more accurate overall national sales charts, such as the Billboard top 200.

In parallel, a company called Broadcast Data Systems (BDS) made it possible to identify the actual number of times (and when and where) a record was played. By correlating SoundScan with BDS data, a record company could achieve a reasonably refined estimate of marketplace activity using real, data-driven statistics. This made it possible to devote (still-scarce) marketing and promotion resources to breaking records in places where they actually were demanded, and to evaluate competitor performance. There remained ways to manipulate both the SoundScan and BDS charts, however, over time it became more difficult to do so. In most instances this required more effort than it was worth, in the sense that the cost (and legal risk) to maintain a data-manipulation staff outweighed the economic and quasi-economic benefit potentially achievable by doing so. SoundScan in particular still has important exceptions to its coverage; for example, it does not include sales data from several large black-box retailers, which (despite their large market share) only incidentally sell music.

The accompanying .pdf file is a quarterly compilation of the Billboard Top 200 sales chart for each calendar quarter from 1970 through 1986. Although an interesting historical project, I doubt it would be worthwhile to enter this data into computer-readable format. The main reason why is because it lacks construct validity; all it really measures is position on the Billboard chart. For the reasons set forth, this has only a poor relationship with actual record sales, and there is no way to determine what they were, anyway. In my judgment, during this period, the amount of this variance could be as high as 50%.

Billboard Top 200 1970 – 1987