Hit Men
CBS Records and Walter Yetnikoff, the business Sony bought in 1988.
Summary
Dannen investigated the American record business in the 1970s and 1980s, and the book's centre is the independent promotion system: a network of freelance promoters, collectively called the Network, who controlled access to radio airplay and who were paid enormous sums by record companies to secure it.
The reporting establishes the economics. Record labels paid independent promoters hundreds of thousands of dollars per record, the promoters had exclusive relationships with specific radio stations, and a label that refused to pay found its records did not get played. Dannen documents the federal investigations into whether this constituted payola, the organised crime connections of several promoters, and the moment in 1986 when NBC News reporting caused the major labels to suspend the system, after which their promotion costs fell sharply and their chart performance did not change.
He also profiles the executives, principally Walter Yetnikoff at CBS Records, Morris Levy at Roulette, and David Geffen, and covers the artist contract terms, the accounting practices that kept artists in debt to labels through recoupment, and the returns and reserves policies that made royalty statements unverifiable.
The book is investigative journalism and is unsparing. It is from 1990 and the industry has been restructured twice since by CDs and then by streaming, so the specific mechanics are historical. What transfers is the analysis of an intermediary who controls access to distribution and extracts most of the value from both sides, which is a structure that recurs in every media business.
Key takeaways 7
- Independent promoters controlled access to radio airplay through exclusive station relationships, and record labels paid them because no alternative route to the audience existed.
- When the major labels suspended independent promotion in 1986, their promotion costs fell sharply and their chart performance did not change, which showed the payments bought nothing.
- An intermediary who controls the only access to distribution extracts most of the value from both the supplier and the customer.
- Recording contract recoupment provisions charged production, promotion and video costs against artist royalties, which kept most successful artists in debt to their labels.
- Royalty accounting used returns reserves and deductions that made statements unverifiable by the artists receiving them.
- The label's economics depended on a small number of large successes funding a majority of releases that lost money, which justified the contract terms to the labels.
- Regulatory prohibition of direct payola produced an intermediary layer that achieved the same result while remaining legal.
Who should read it
Operators and investors in media and content businesses studying how a distribution bottleneck concentrates value in an intermediary.
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