The highlights of NARM are large-group meetings, where all of the attendees get together in a large auditorium to watch presentations from the record labels. These presentations are elaborate, frequently involving not only montages of music videos but also artist performances. Labels try to one-up each other by staging the most elaborate spectacles – the better, I suppose, to cultivate impressions in the fragile minds of the wholesalers and retailers.

Needless to say, this whole concept is absurd. I used to go to NARM conventions consistently throughout the mid 1980s to the late 1990s. They were an expensive waste of time. Record labels spent hundreds of thousands of dollars preparing videos to show to the retailers, bringing in bands, hosting parties, hiring hookers, etc. There are a dozen other variables that affect the amount of records sold, which retailers have nothing to do with. These include radio airplay; the record company’s marketing, promotional and advertising commitment; and other silly factors such as whether people actually like the record. Few things are more ludicrous than a thousand grown men and women sitting in an auditorium watching music videos and artist performances presented by record companies.

In fairness, record labels used NARM to focus activity on their own operations. For example, there typically were small group meetings between key retailers and record company sales executives. And, it was an excuse for them to bring their key sales executives in from the field for group meetings. Both of these activities yielded some economic utility. Other than this, NARM simply was a giant boondoggle.

To counteract the problem, I developed what I now think of as my “NARM meeting strategy.” It goes something like this. You show up at one of the large group meetings. You walk around the room, greeting everyone you see – all of your colleagues and acquaintances, who have shown up for the presentations. After you work the room, then you leave. If somebody later asks you where you were, you simply tell them you were on the other side of the room. And if somebody on that other side of the room asks you where you were, you simply relate the inversion of the same story. There are enough people, and there is enough confusion, that you remain perfectly credible. There’s absolutely no point in hanging around, because you’d get bored to death. This frees you up to do something more worthwhile, like staring at the wall. I since have been able to expand this strategy to all kinds of group meetings and conventions in other contexts. Try it, it works!

February 17, 1981 – Chronological Listing of Claims

February 19, 1981 – List of Claims, Promotion Issues

February 24, 1981 – Apple Claim for Rate Differential

February 27, 1981 – Apple Claim for Scrapped Inventory

February 27, 1981 – Beatles and Apple Road Map

April 1, 1981 – Beatle Product Label and Series Numbers

April 1, 1981 – History of Publisher Licenses Computations

April 9, 1981 – Apple Audit Claim for AFM Fees

April 16, 1981 – Apple Audit Claim for Excess Package Deduction

May 12, 1981 – Default Penalty against Apple

May 12, 1981 – Sometime in New York City

CEMA P&D deal format late 1980s

Bust It Records – Joint Venture Agreement with Capitol

Capitol Artist Agreement – basic contract

Capitol Production Agreement – basic contract

Record company P&L

Rhino Records materials

Kenny Rogers contract

Neil Diamond contract

These are, of course, my personal reflections. As set forth in various books and articles about their history, the activities and operations of publicly-traded record companies, such as EMI Music, are a matter of public interest – not only to the artists under contract to those companies, the people employed by them, and the consumers who buy their records – but also to their shareholders. That being so, the matters set forth herein are my personal opinion and interpretation of the facts on the ground.

A. Screen Entertainment Ltd.

When I joined Capitol, EMI Music just had been taken over by Thorn Electrical Industries in December 1979 for a reported £165 million. Richard Cave was Thorn-EMI’s chairman, having been inherited from Thorn. In the 1960s and 1970s EMI had accumulated a number of diverse unrelated companies. In retrospect this model of business organization is dubious, because it traps shareholder value. The laggards drag down the prospects of the leaders. Nonetheless, at the time, this strategy was in vogue, and in fairness to EMI had been adopted by many other companies with entertainment divisions, such as Gulf & Western, which owned Paramount Pictures. For a recent economic analysis of this issue, see this article.

Justifying its merger with Thorn, EMI stated: “The main aims for the business areas in which the Company is involved are: to play a leading role in meeting the requirements of the widening and expanding home entertainment industry; to have a strong engineering group with interests in high technology, electronics, defence and other special areas of interest; to support our established mature businesses and to increase our influence in international markets.” Thorn and EMI later demerged in August 1996. The tortuous explanations for why that supposedly made sense, particularly in light of the rosy statements about the desirability of the original merger, are set forth in Brian Southall’s book, The Rise & Fall of EMI Records (2009, Omnibus Press).

In its conglomeratized state, Thorn-EMI copiously acquired and divested itself of dozens of firms. One of its assets was Screen Entertainment Ltd., a major UK movie producer and film studio. It owned, among other properties, the famous Elstree film production facility, a cinema chain, and a library of approximately 2,000 titles. I had a background in independent film, and also was working with a Capitol-EMI subsidiary called Picture Music International, a producer of music videos, which just then were starting to emerge. Taking a straightforward approach, I introduced myself to various persons of interest at Screen Entertainment, and gradually insinuated myself at its corporate level. I already was spending some time in London at EMI Record’s office at Manchester Square and at EMI Music’s office at Gloucester Place, so it was a simple matter to get up to Hertfordshire, which is where Elstree was located. I got busy trying to discern, for example, if there were any “synergies” between Screen Entertainment and EMI Music.

I was surprised when Thorn-EMI’s senior management decided that film was not one of its core businesses. Typically, Thorn-EMI was in serious financial trouble at the time. In 1985, its stock price had declined by 44% over the previous 18 months. According to one analyst, its stock was trading at a “diversification discount” – a value less than that of the individual companies comprising it – of 68%. After shopping it around, in May 1986, Thorn-EMI sold Screen Entertainment to the Australian company Bond Corporation Holdings Ltd., owned by Alan Bond, for $190 million.

I thought the price was low, not only to book value, but also in relationship to the potential future value of the assets. As with CDs, which just then were starting to come on to the market, who knew what new technologies awaited film? I wrote an internal memorandum on the issue, arguing for an alternative valuation approach (it was roundly ignored). I stated that a portfolio of intellectual property assets was worth the present discount value (using a set of interest rate assumptions) of a projected revenue stream (taking into account possible future uses) potentially to be generated by their commercial exploitation over some period of time (say, 10 years). By no stretch of the imagination was this formulation novel, but it seemed so to the people on Thorn-EMI’s corporate staff with whom I dealt. The transfer of classic British assets out of the country provoked debate in the British Parliament; see this amusing exchange. The UK Monopolies and Mergers Commission permitted the deal to go, through, without protest.

I was astonished when, three days later, Bond sold Screen Entertainment to Cannon Group, Inc., for $266 million – a profit of $79 million, after owning it for less than a week. Cannon was owned by Menahem Golan and Yoram Globus. Others shared my amazement – not only on the Thorn-EMI corporate staff, but also by the entertainment industry, the financial media, and the world at large.

This is where Marriott comes in. I asked him what went wrong, and what had happened to my valuation analysis. He muttered something (in the way British people are liable to do in such instances) about different valuation philosophies, which I did not regard as a credible answer. The Screen Entertainment sale and its aftermath lead me to conclude EMI had no real corporate strategy. More seriously, it corrupted my view as to the competence (or lack thereof) of Thorn-EMI’s senior management and, by analogy, my perspective on the corporate world at large.

Update on some of the parties involved: Bond Holdings filed for bankruptcy in mid-1991. In May 1992 Alan Bond was convicted of securities fraud. In 1987, Pathé Communications, an Italian company owned by Giancarlo Parretti, acquired Cannon for assumption of a reported $250 million of indebtedness. Pathé also acquired MGM/UA in 1990 for a reported $1.36 billion. The French bank Crédit Lyonnais financed the acquisition. Pathé became insolvent and Crédit Lyonnais took control of it in April 1991. It invested approximately $2 billion in trying to keep Cannon/MGM/UA afloat. In May 1994 Crédit Lyonnais itself became insolvent after losing some $1.2 billion in 1993, and, amid allegations of fraud, was bailed out by the French government. In October 1996, Parretti was convicted of bank fraud. Golam and Globus went on to form various independent film production companies.

B. Rent-A-Center

A second debacle concerned Rent-A-Center, which was another company Thorn-EMI owned in the U.S. Thorn-EMI had acquired it in 1987 for a reported $594 million – an astonishing 42 times earnings. Rent-A-Center’s business was leasing appliances to persons with low incomes, who could not afford to buy them outright. This turns out to be a lucrative business, and Rent-A-Center quickly became a disproportionate contributor to Thorn-EMI’s pre-tax operating income (PTOI) and return on sales (ROS). In fact, its turnover, and profitability were several times that of EMI Music. Yet, surprisingly, only a few people in the company knew anything about it, particularly in the U.S., even though (arguably) Rent-A-Center pulled away funds Thorn-EMI otherwise might invest in its music division.

All of that changed as evidence of Rent-A-Center’s allegedly unscrupulous business practices gradually came to light. Being the closest person on point in the U.S., I led a (then-confidential) investigation into Rent-A-Center’s operations, together with various members of Thorn-EMI’s internal audit group. The problem continued to fester until it later became public; as summarized in a later expose, Rent-A-Center (allegedly) used high-pressure, predatory sales methods in dealing with its clientele, bordering on the coercive and abusive. One manager is quoted as stating that Rent-A-Center ultimately collected more than $5,000 on a VCR that retailed for $119. Employees encouraged unsophisticated customers to rent more goods than they could afford. When they fell behind in payments, Rent-A-Center repossessed the goods, then re-rented them. Another tactic some employees used was the “couch payment” – sexual favors exacted in lieu of cash.

Not surprisingly, nothing came of the earlier report I had made to Thorn-EMI. I asked Marriott what happened. As with Screen Entertainment, Marriott was unable to give me a credible answer. It wasn’t hard to figure out, though, that it had gotten swept under the proverbial rug, particularly in light of Rent-A-Center’s disproportionate contributions to Thorn-EMI’s turnover and profitability.

C. The Stresa Conference

In June 1988 I attended a management conference Marriott organized in Stresa, Italy, which overlooks Lake Maggiore. We stayed at the famous Hotel des Iles Borromées – the same one where Ernest Hemingway set part of his famous novel, “Farewell to Arms.”

It was a beautiful location and I spent more time lolling about than I probably should have. Marriott had devised a preposterous new-age exercise in corporate decision-making. We were instructed to anticipate a counterpart party’s responses to certain hypothetical deal scenarios, and devise appropriate measures. I naturally couldn’t resist using what had happened with the Bond sale as an example. By using simple principles from game theory, I was able to devise several alternative (and far more remunerative) outcomes. Marriott later came to call this the “Kronemyer strategy,” which caused me chagrin, as there was nothing particularly novel or unique about it. If you’re interested, here is a copy of an amusing piece Marriott wrote called the “EMI Business Affairs Mission Statement.”

EMI Music Business Affairs Mission Statement

D. 10% Royalties and Debit Balances

Many of Capitol’s early artist contracts were an embarrassment. Its 1943 agreement with Nat Cole, for example, called for a one-and-one-half cent royalty (specified in pennies, and not as a percentage). If you want to download it, here’s a copy of the Nat Cole agreement (which appears in various legal actions as a matter of public record):

Nat King Cole Contract – November 10, 1943

[In fairness to Capitol, this same situation also pertained at every other record company.]

Cole of course was one of Capitol’s most famous artists. If this is what it did to Cole, think for a moment of what it was doing to other artists of less renown. In the late 1980s and early 1990s I found myself regularly called upon to testify about various irregularities in Capitol’s royalties calculation practices and gaps in its contracts. There were a myriad number of ways in which the financial calculations called for by Capitol’s contracts disadvantaged its artists. Beyond that, they variously were characterized as unfair, unconscionable, unilateral and adhesive. Artists sought to have them declared void, or invalid, or to have them unilaterally amended by a judge. And, even though they purported to be exclusive, Capitol’s contracts did not appear to cover acetate recordings of live performances on radio, made during an odd lacuna of time in the mid-1940s when members of the American Federation of Musicians (“AFM”) were on strike. [Hard to believe, but this issue was not resolved from a legal standpoint until 2010 in a case involving Hank Williams].

The Cole situation was particularly vexing in that Capitol’s A&R department had the genuinely brilliant idea of creating a faux duet between Nat Cole and his daughter Natalie Cole, singing his signature song “Unforgettable.” Royalties to the Cole estate were an impediment to making this happen. I met with Maria Cole (together with Clark Duval, another Capitol-EMI executive) at the NARM convention in New Orleans, where we laid the groundwork for resolving this issue.

Trying to take a broader view of the situation, in mid-1992, I proposed Capitol unilaterally amend all of the artist contracts it had entered into before 1972, to provide for a minimum 10% royalty rate. I also proposed that all outstanding “debit balances” – the amount an artist’s account must recoup before royalties actually become payable – be forgiven. The reason why we selected 1972 is because that was the year the U.S. Copyright Law was amended to extend copyright protection to master sound recordings. Before then, only the musical composition embodied in the master sound recording could be copyrighted. In retrospect this doesn’t particularly make a lot of sense; there’s no reason why the applicable date couldn’t have been earlier, or later. The best way to think of it now is that the early 1970s were the birth of the modern era in the record business, when artists started to have better representation, and their contracts with record companies actually began to get negotiated, rather than simply propounded as a “take-it-or-leave-it” type of arrangement.

This was not a new idea. Atlantic Records and (surprisingly) MCA Records already had implemented similar reforms. The economic consequences to Capitol would be minimal, as only a handful of artists from that era still were popular and sold any records. Imagematically, though, it would demonstrate a spirit of corporate concern and altruism. Despite these arguments, Marriott opposed this initiative. EMI’s more-senior corporate management, however – all the way up to Jim Fifield, then Chairman of the company – were for it, so it was adopted. Sony later followed suit, although PolyGram, BMG and Warner Bros. declined to do so.

E. Rhino Records and other Aborted Acquisitions

Finally, there is a sad tale of corporate incompetence I must share involving Capitol-EMI’s mis-steps with Rhino Records, one of its distributed labels. In 1990 EMI and Rhino bought the Roulette Records catalog, owned by Morris Levy. Capitol-EMI acquired rights for the world ex-U.S.; Rhino acquired U.S. rights. I worked on the U.S. aspects of this transaction with Marriott. I urged him in the strongest possible terms to negotiate for worldwide rights; there was no need to include Rhino in the transaction.

Roulette had a practice of not paying royalties to its artists. Apocryphally, Levy pulled out a gun when Tommy James of the Shondells fame inquired as to the whereabouts of his modest 5% royalty. “I’m concerned about this type of liability,” Marriott told me. “Don’t worry about it,” I said. “Any claims will be minor; we can settle them easily; and take a reserve for them in any event.” “I just won’t do it,” Marriott replied. Shortly after the transaction closed, Marriott approached me, somewhat ruefully. “Can we change things around and get world-wide rights back from Rhino?” he asked. I dutifully presented this request to Richard Foos and Harold Bronson, Rhino’s owners. We all doubled over in spasms of laughter.

I later attempted to acquire Rhino Records on behalf of Capitol-EMI; see this post. I tried to acquire Motown Records from Berry Gordy in 1985, and had the opportunity to do so for $35 million (it later was acquired in July 1988 by the investment banking firm Boston Ventures for a reported $61 million; Boston Ventures sold it to Polygram in August 1993 for a reported $325 million, resulting in notional profit of $264 million.) I tried to acquire the independent label Fantasy Records from Saul Zaentz in 1986, and had the opportunity to do so for $50 million; it later was acquired in 2004 by its present owner, Concord Records, for a reported price in excess of $100 million.

It was while working on the Rhino deal that Marriott definitively revealed his corporate philosophy to me. We were walking around Cologne, Germany, one evening. He said, and I’ll never forget it, that the best thing to do is “absolutely nothing. The single greatest mistake one can make in a corporate environment is to think you were hired to take the initiative and actually do something, which is a false conceit. You might think you have ideas, but they’re idiosyncratic. If you follow your business instinct, it will only get you in trouble. If you make a decision, there is a significant chance it will be the wrong one, or will lose money, in which case you will get fired.” My philosophy being the exact opposite, I didn’t really have anything to say in reply.

Update: In May 1999 Marriott was fired from EMI Music and joined a private law firm. He later became chairman of the International Optical Disc Replicators Association, a trade group concerned with the licensure of patents for manufacturing and formatting of DVDs.

Dennis White had been Capitol’s head of sales since around 1975, reporting to Don Zimmermann. He became CEMA’s first president. Joe Smith became head of Capitol-EMI in August 1987. Here is a copy of the press release:

Dennis White Press Release

I guess Smith didn’t get along with White, because he fired him shortly thereafter. I thought White was a great, old-school record executive, and I was sorry to see him go. By the same token, I was a big fan of Smith, so I stayed as far away from the controversy as I could.

To replace White, Smith hired Bach. For a number of years Bach had been in the upper management hierarchy at WEA. He recently had lost out to Dave Mount in the succession battle to succeed Henry Droz. Smith knew Bach from his own former tenure at Elektra Records. I once asked Smith about his history with Bach, and he candidly told me he viewed him as a plausible alternative to White, mainly because he came from WEA. “If he’s from WEA, then he must be good.”

My policy always has been to try and make friends fast, so I made a point of hitting it off with Bach as soon as he arrived. Bach tinkered with the organization structure to suit his preferences, firing people here and hiring people there. He redesigned the company’s logo. Bach’s name actually is Brumbach; why he shortened it, we’ll never know (nor will we know why he didn’t pick “Brum” instead of “Bach”). This struck me as evidence of a superficial personality trait. He was proud of an MBA he had received from an evening program at Pepperdine University – a talisman he seemingly believed made him smarter than most other people in the company. Much of his best work, in my view, consisted of doing nothing. Joe Mansfield was VP of Marketing, and Joe McFadden was VP of Sales. Mark Jackson (formerly VP Finance for the EMI Group, based in New York) became CEMA’s CFO in June 1991. True record men, all three of them. Bach wisely left them alone.

Whenever Bach took the initiative, he was prone (again in my personal opinion) to make management errors of varying degrees of culpability. He hired one of his colleagues from the Pepperdine program (who will go nameless) as VP of Human Resources – then, as now, a fancy name for the personnel department. This person specialized primarily in the new-age psycho-babble then fashionable. He embarked on a quixotic crusade against retailers who also sold used CDs, alienating several key customers and precipitating various lawsuits and governmental investigations. He spent several hundred thousand dollars on a research study by a “management consulting” firm (which also shall go nameless), resulting in nothing but a regurgitated version of the information we presented to it. While wasteful, this in and of itself was not particularly disturbing; what made it so was Bach’s belief that the management consultants actually had something useful to say. Behind his avuncular disposition, Bach didn’t have the specialized skills necessary to be a record executive. He wasn’t passionate about music; he just as easily could have been doing the same thing for an insurance or manufacturing company.

Most seriously (again in my personal opinion), Bach never grasped the dynamic of dealing with the various labels comprising the Capitol-EMI group, particularly as the Koppelman regime took over in New York, Virgin Records became ascendant, and the company sank into more-or-less perpetual turmoil. He let the corporate group push him around, rather than taking a stance that was in CEMA’s own best interests. From a corporate standpoint, a division chief has to do more than “watch his back and save his skin,” he(she) actually has to worry about maintaining the operational integrity of the company and looking out for its people, rather than simply bending to the prevailing winds. Bach did not do this, which, in my view, is the worst sin a division head can commit. One might argue this predicament is endemic to the politics of a large corporate organization, and to some extent it is. What distinguishes a great manager from a mediocre one, though, is his (her) ability to navigate these shoals successfully.

Aside from such matters, I segued into an odd role with Bach. For one thing, he looked to me to set policy with him. We would have long meetings, where he would solicit my opinion about various issues, I would express it, and then he would adopt it. I was in the uncomfortable position of having to develop an increasingly refined repertoire of expressions, to agree with Bach that what I proposed really was his idea all along. He also had me do most of his writing for him, particularly corporate presentations, magazine articles, press releases and even speeches. Here are a few examples:

Notes from various CEMA branch meetings

Article about record prices

I left the firm in March 1993. Amazingly, even thereafter, Bach continued to turn to me, having me perform various (uncompensated) tasks relating to CEMA, as well as personal matters. It amused me to play along with Bach’s concept that I actually enjoyed doing these things for him. Bach managed to hang on as CEMA’s President until Ken Berry fired him in March 1999. He then went to work for Disney Records, where he lasted until he was fired in June 2001.

Unfortunately, it appears Bach (evidently) still is refractory to understanding these issues. On September 8, 2010, in response to yet another management shake-up at EMI, he circulated an e-mail regarding the departure of Ronn Were, EMI’s head of North American operations. “I only hope the guy got my kind of package!” Bach wrote, most likely referring to a large severance payment he received after Berry fired him. I would like to suggest that remarks like these demonstrate lack of sensitivity to the dozens of people whose careers Bach was complicit in derailing. It’s not as though Bach deliberately eschewed being sensitive; rather, as his e-mail tends to demonstrate, he simply doesn’t know what this means.

CEMA Sales Policy Handbook – March 1993

There were some interesting twists and turns to the Solar story. I signed Solar to Capitol-EMI in 1986. At the time, Solar was engaged in a bitter dispute with Elektra Records over who had distribution rights. Below is a copy of Solar’s legal action against Elektra. The relationship between Solar and Elektra was complicated by the fact that Elektra had loaned Solar money to construct a $4 million office building located at 1635 N. Cahuenga Boulevard in Hollywood, not far from the Capitol Records tower. Elektra took back a mortgage as security, and had commenced foreclosure proceedings after Solar stopped paying on the loan. I finally was able to enter into a Settlement Agreement with Elektra. Below is a copy of the settlement agreement (this looks to be a penultimate draft).

Although Solar and Capitol had great hopes for a long-lasting relationship, it was not commercially successful. In 1989, Solar shifted distribution to CBS Records. Around 1991, Solar agreed to “sub-distribute” a new label, Death Row Records, through its deal with CBS. The Solar-Death Row agreement was structured as a kind of joint venture. Although Solar held a majority ownership interest, Death Row was the managing partner. Among other inducements, Death Row agreed to deliver (through Solar, to CBS) records produced by Dr. Dre and records recorded by other artists such as NWA and Easy E. Death Row moved into the Cahuenga building, which became its headquarters. It was the site of the famous confrontation between Suge Knight and Easy E over the label Ruthless Records, owned by E and Jerry Heller. Ruthless had artists that Death Row wanted. Knight allegedly threatened (or at least intimidated) E, until he agreed to sign a release. The history of this is partially recounted in Ronin Ro’s book Have Gun Will Travel – the Spectacular Rise and Violent Fall of Death Row Records (1998: Doubleday). I knew E and Heller pretty well as a result of other dealings, and made what in retrospect was a wise policy decision to stay out of the controversy. I later had direct dealings with Suge when he was trying to reorganize Death Row and in fact visited him once in jail.

The Solar – Death Row relationship also eventually precipitated litigation, primarily over who owned what and who owed money to whom. Ruthless sued Death Row, Solar sued Death Row, and CBS sued Solar. In the meanwhile Death Row entered into a new agreement with Interscope, owned by Ted Fields and Jimmy Iovine, which shored up its finances and rights somewhat. Death Row moved out of the Cahuenga building. While I am not sure of the intervening ownership and tenancies, after I started financing independent films, I met several times there with Tracy Edmonds, formerly wife of Kenny “Babyface” Edmonds. He must have known the building well, as a result of having been signed to Solar. And it was rather uncanny being back in Dick Griffey’s office again.

Capitol’s Settlement Agreement with Elektra

Solar Records v. Elektra Records

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

EMI Prospectus to Acquire SBK 1989

SBK Records Joint Venture Agreement

Virgin Music Acquisition – Prospectus