Part 6 (1/2)

Mys.p.a.ce began in 2003 as an improvement on the early social networking website Friendster. Like YouTube, the website soon became an internet phenomenon, racking up more than 100 million accounts within three years. Although artists from middle-of-the-road pop singer Colbie Caillat to one-man band Secondhand Serenade would soon break after generating tons of publicity through their Mys.p.a.ce pages, major record labels initially reacted in a familiar way. In 2006, Universal Music sued the company, alleging it encouraged users to infringe their song and video copyrights by providing free music.

But label executives, seeing just how much publicity a familiar or unknown act can generate by providing free music on its Mys.p.a.ce page, changed their att.i.tudes over the next few years. ”We've had relations.h.i.+ps with [the labels] since the beginning of Mys.p.a.ce, but we never came up with a concrete business plan that we could present to them that shows a big win for our users that also makes sense for the music business,” Chris DeWolfe, one of the company's founders, said in early 2008. ”We needed to create this utopian service in such a way that the music companies are starting to make money. That took a little while to do. Att.i.tudes have definitely changed over the years, and music companies are wanting to experiment more. They're more daring and more creative.” In April 2008, Universal dropped its lawsuit, and three of the four major labels partnered with Mys.p.a.ce Music later that year, selling downloads and streaming songs for free. At the time this book went to press, EMI Music, reeling from layoffs and a corporate takeover, was expected to join the partners.h.i.+p, too. In the social networking world, Mys.p.a.ce compet.i.tors like Facebook and Last.fm also relied heavily on music, and labels made deals with them, too. In spring 2008, venerable rock band R.E.M. released its comeback, Accelerate, Accelerate, for free via iLike, Facebook's music application. It sold 115,000 copies of the alb.u.m (that's combined sales of CDs plus online alb.u.ms) in its first week, hitting No. 2, R.E.M.'s highest chart debut since 1996. Later in 2008, iLike made a deal with the Rhapsody subscription service to stream millions of major-label-owned songs for free via Facebook. for free via iLike, Facebook's music application. It sold 115,000 copies of the alb.u.m (that's combined sales of CDs plus online alb.u.ms) in its first week, hitting No. 2, R.E.M.'s highest chart debut since 1996. Later in 2008, iLike made a deal with the Rhapsody subscription service to stream millions of major-label-owned songs for free via Facebook.

”When we started out in 2002, the major labels didn't take our calls-there was panic about anything having to do with the word MP3 or online music generally,” says Martin Stiksel, cofounder of Last.fm, which CBS bought in 2007 for $280 million. ”It took until about 2006 to see services like ours as something other than an enemy.” In part, this was because the att.i.tudes of major label executives changed, over time, as they saw CD sales dropping no matter how aggressively they tried to stop online piracy. But in part, it's because what Robin Bechtel, Syd Schwartz, Ty Braswell, and others were saying for years in meetings with their bosses about the importance of the internet finally started to catch on.

DURING THE 1990S- 1990S-THE heart of the CD boom-Sony Music Entertainment chairman Tommy Mottola built the most bulletproof hit machine in the record business. Sony sold more than 50 million of Mariah Carey's records in the US alone, and 11 million of Celine Dion's heart of the CD boom-Sony Music Entertainment chairman Tommy Mottola built the most bulletproof hit machine in the record business. Sony sold more than 50 million of Mariah Carey's records in the US alone, and 11 million of Celine Dion's t.i.tanic t.i.tanic soundtrack. With the help of Sony, little-known Seattle punk bands Pearl Jam and Alice in Chains turned into the world's biggest rock stars. The Sony team shared one overwhelming philosophy: It takes money to make money. ”If a record wasn't selling, they would apply a little bit of muscle to get it in the front of a store-and it would start selling,” says Randy Sosin, a longtime executive at compet.i.tor Interscope Records. ”It was a little bit of old school.” Sony routinely spent $1 million on a new artist, knowing full well that few of these artists would come close to making money. The ones that did paid for the ones that didn't-and Sony's team was masterful at boosting the odds. Like almost every other major label, Sony lost ground to Clive Calder's nimble Zomba Music Group in the era of boy bands and Britney. But as always, Mottola's team fought back: For singer Jessica Simpson's 2001 CD release, Mottola threw a sw.a.n.ky party on a yacht in the East River near New York City. ”He did spend a ton of money,” says Barbara O'Dair, party attendee and editor-in-chief of soundtrack. With the help of Sony, little-known Seattle punk bands Pearl Jam and Alice in Chains turned into the world's biggest rock stars. The Sony team shared one overwhelming philosophy: It takes money to make money. ”If a record wasn't selling, they would apply a little bit of muscle to get it in the front of a store-and it would start selling,” says Randy Sosin, a longtime executive at compet.i.tor Interscope Records. ”It was a little bit of old school.” Sony routinely spent $1 million on a new artist, knowing full well that few of these artists would come close to making money. The ones that did paid for the ones that didn't-and Sony's team was masterful at boosting the odds. Like almost every other major label, Sony lost ground to Clive Calder's nimble Zomba Music Group in the era of boy bands and Britney. But as always, Mottola's team fought back: For singer Jessica Simpson's 2001 CD release, Mottola threw a sw.a.n.ky party on a yacht in the East River near New York City. ”He did spend a ton of money,” says Barbara O'Dair, party attendee and editor-in-chief of Teen People Teen People. Simpson made a respectable third-place showing in the teen-diva arena, after Spears and Christina Aguilera.

However, the ”It takes money to make money” philosophy works only if a company is making money. making money. After ripping and burning, Napster, online piracy, and the industry's hamhanded response to it all, US alb.u.m sales were down 17 percent in 2002. By early 2003, Mottola's bottom line looked shockingly ordinary. Sony Music lost $132 million during the first half of that fiscal year. The label's American market share dropped from 16.6 percent in 1998 to 15.7 percent in 2002-and would fall to 13.7 percent in 2003. After ripping and burning, Napster, online piracy, and the industry's hamhanded response to it all, US alb.u.m sales were down 17 percent in 2002. By early 2003, Mottola's bottom line looked shockingly ordinary. Sony Music lost $132 million during the first half of that fiscal year. The label's American market share dropped from 16.6 percent in 1998 to 15.7 percent in 2002-and would fall to 13.7 percent in 2003.

Ordinarily, none of this would have fazed Mottola. He had endured a similar sales dip in the early 1990s. The difference this time was that while Mottola had been so deft at manipulating Norio Ohga and other Sony Corp. executives to wrest power away from Walter Yetnikoff, by 2003 his heart just didn't seem into the politics. At age fifty-three, his attention was elsewhere. He'd survived a divorce from Mariah Carey after five years of marriage.* He remarried, to the golden-haired singer and Mexican soap-opera beauty Thalia, and built a $4 million villa for her in Miami. He remarried, to the golden-haired singer and Mexican soap-opera beauty Thalia, and built a $4 million villa for her in Miami.

By 2002, the tolerant Ohga had left the company. His replacement, n.o.buyuki Idei, was not so easily impressed by flashy American record executives. Moreover, Mottola had an uneasy relations.h.i.+p with his direct boss at Sony Corp., CEO Sir Howard Stringer, a Welshman with a tough-minded business reputation. Stringer was an active hobn.o.bber and skilled party host, remembering his guests' names and showering them with hugs. But just as Yetnikoff had referred to his superiors with crude bon mots like ”the Jew Upstairs,” Mottola's nickname for Stringer was ”the Buffoon.” He kept Stringer away from Sony stars, refusing to dole out good seats at concerts and never inviting him to Grammy Awards parties. ”Tommy didn't 'manage up' well with regards to Howard Stringer. He didn't include him enough and operated independently. And he was just on a roll-for years and years, he couldn't be touched,” says a major label source. ”As soon as the company started losing money, they used that opportunity to get rid of him. [Mottola] didn't ma.s.sage the relations.h.i.+p. If he had let Howard Stringer play in his sandbox, and had him up in the pictures with his artists and vetted him at awards shows, he'd still be there.”

Stringer frequently complained to his brother, Rob, a Sony UK executive who'd risen through the ranks on his own, according to New York New York: ”Why the f.u.c.k am I dealing with this guy? Why the f.u.c.k are we paying this guy? Tell me what this guy does. Tell me what this guy does. Tell me what this guy does Tell me what this guy does.” Why, indeed? Mottola announced in 2002 he wanted a new contract, but got no response from his superiors. Idei stopped inviting him to j.a.pan. Stringer started to make public hints that Sony would not renew Mottola's contract. Finally, not wanting Mottola to make an embarra.s.sing public scene, as Clive Davis had done earlier in the decade with BMG, Sony bought out his five-year contract. Mottola's fall finally went public on January 9, 2003, in the form of a faxed press release.

The rest of the music business was shocked. ”The Tommy-Donnie-Michele management structure was viewed by everybody, without question, as the most stable management structure in the business,” says Jim Guerinot, a former A&M executive who manages Gwen Stefani, Nine Inch Nails, and others. ”They got a lot of momentum and strength from that stability. Those guys had been in place a long time. n.o.body seemed more invulnerable. They really appeared omnipotent.” And then Mottola was gone.

Within a day, his replacement had been named-and it wasn't Donnie Ienner, his heir apparent. Stringer went outside the company, to an old friend who'd worked with him at CBS, making doc.u.mentary films in the 1970s: Andrew Lack, fifty-five-year-old president of NBC. Lack had no experience whatsoever in the music business, a fact that was even more conspicuous at a major like Sony, where for decades the powers-that-be had artist-centered pedigrees stretching back to Hall and Oates, Blood, Sweat and Tears, even Elvis. As a bone to the Mottola-team remnants, Stringer made Ienner president of Sony Music US. Frustrated with his high responsibility but low autonomy and prestige, Ienner turned around and created some politics of his own. Within months, the longtime Columbia exec indulged his rivalry with sibling label Epic and purged many of its holdover employees, sources say.

The power s.h.i.+ft was symbolic. Tommy Mottola represented the heart of the spend-money-to-make-money CD boom. That's not to say there were no CEOs left with this philosophy-the music industry's grand old man, Clive Davis, was still spending lavishly at BMG.* Antonio ”LA” Reid jumped from Arista to Island Def Jam, taking his private jets and legendary artist payouts with him. (Reid's son Aaron was a star of MTV's Antonio ”LA” Reid jumped from Arista to Island Def Jam, taking his private jets and legendary artist payouts with him. (Reid's son Aaron was a star of MTV's My Super Sweet 16, My Super Sweet 16, throwing a lavish party including a concert from hot Island Def Jam rapper Kanye West and an appearance by Diddy. His invitations to guests came via MP3 player.) But in the post-Napster world, these old-school record men started to give way to new-school cost cutting-layoffs, dropping artists, even the dreaded scaling back of expense accounts. Sony Music had already started shrinking, from 17,700 employees in 2000 to 13,400 in 2003. And Tommy Mottola wouldn't be around to ride the hydrogen bomb down to the ground, like Slim Pickens in throwing a lavish party including a concert from hot Island Def Jam rapper Kanye West and an appearance by Diddy. His invitations to guests came via MP3 player.) But in the post-Napster world, these old-school record men started to give way to new-school cost cutting-layoffs, dropping artists, even the dreaded scaling back of expense accounts. Sony Music had already started shrinking, from 17,700 employees in 2000 to 13,400 in 2003. And Tommy Mottola wouldn't be around to ride the hydrogen bomb down to the ground, like Slim Pickens in Dr. Strangelove. Dr. Strangelove. In a press release, Stringer called him ”an icon of the music industry” and referred to his ”legacy to be envied.” Mottola would restart a record label with a familiar name-Casablanca, the disco label whose excesses almost killed the entire industry in the late 1970s. Casablanca signed actress Lindsey Lohan and had a few hits, but as of this writing, Mottola's career as a hit maker is over. ”It was the end of an era,” says a record company source. There was no longer enough money left in the record business to support Tommy Mottola. In a press release, Stringer called him ”an icon of the music industry” and referred to his ”legacy to be envied.” Mottola would restart a record label with a familiar name-Casablanca, the disco label whose excesses almost killed the entire industry in the late 1970s. Casablanca signed actress Lindsey Lohan and had a few hits, but as of this writing, Mottola's career as a hit maker is over. ”It was the end of an era,” says a record company source. There was no longer enough money left in the record business to support Tommy Mottola.

One of the first things Andrew Lack did as head of Sony Music was something his predecessor almost certainly would have never done: He started a friends.h.i.+p with a rival. Rolf Schmidt-Holtz was chairman of BMG, which, not so long ago, had fought like a prize fighter against Sony and the other major labels. Schmidt-Holtz had been a journalist and political talk-show host before becoming a media executive in Germany. Lack had been president of NBC, overseeing Today Today and and NBC Nightly News NBC Nightly News. Both were outsiders, s.h.i.+fting from TV to music. Both were cutting costs from their record labels at a time when online piracy and CD ripping and burning had ravaged a gigantic business. ”We speak the same language,” Schmidt-Holtz told the Wall Street Journal. Wall Street Journal. ”Personal trust allowed us to overcome a number of obstacles.” ”Personal trust allowed us to overcome a number of obstacles.”

Bertelsmann, the German publis.h.i.+ng company that owned BMG, had survived its misadventures with Thomas Middelhoff and Napster, but just barely. Teen pop, its music mainstay in the late 1990s, was over. Reeling from a drop in CD sales, Bertelsmann was merger-happy. In 2003, its executives approached AOL Time Warner, whose own merger was on the verge of catastrophe, and offered a 5050 deal to combine BMG with Warner Music. Warner was interested, but both sides immediately grew stubborn. AOL Time Warner insisted its catalog of Madonna, Frank Sinatra, and Led Zeppelin tunes was far more valuable than BMG's catalog of Elvis Presley and the Dave Matthews Band. Bertelsmann's offer was $100 million, but Warner demanded an extra $150 million-too much for the German company. That's when Schmidt-Holtz and his superiors turned to Sony, using Lack as their initial connection and conduit. After weeks of talks, Schmidt-Holtz met with Sony's n.o.buyuki Idei and Sir Howard Stringer and Bertelsmann chief executive Gunter Thielen for ninety minutes at a New York airport in October 2003 and hashed out a merger. Regulators were concerned Sony BMG would form a cartel and violate international ant.i.trust laws. But they ultimately agreed Big Music wasn't so big anymore and the major labels didn't control as much money as they used to. They approved the deal in July 2004.

On paper, the new Sony BMG looked like a powerhouse. They had Bruce Springsteen and and Britney Spears, Barbra Streisand Britney Spears, Barbra Streisand and and Elvis Presley. Combined, their market share, at least in the US, added up to around 30 percent, a few points above even dominant Universal Music. The only bad news was a few thousand layoffs, but that's the price of making two companies stronger, right? But the executives miscalculated. Sony's Lack and BMG's Schmidt-Holtz may have been pals, but in the ranks underneath them, some of the fiercest compet.i.tors in music industry history were suddenly partners, conducting business with tight smiles. Clive Davis, who had started his career nurturing Bob Dylan and Streisand at Columbia and had discovered Whitney Houston with Arista Records in the 1980s, was the head of BMG. Don Ienner, a Sony Music company man who had been one of Tommy Mottola's loudest and most cutthroat loyalists, was in charge of Columbia and Epic. Making matters worse, Ienner had worked for Davis in the early 1980s at Arista, and had no intention of taking a subservient role this time. Things were uneasy whenever they found themselves at meetings together. ”One side of the room was Clive and his people. The other side was Donnie and his people,” recalls Joe DiMuro, executive vice president of the merged company's strategic marketing group until he left in late 2006. ”There was a level of cordiality, but you could tell there was a dividing line. It was palpable.” Elvis Presley. Combined, their market share, at least in the US, added up to around 30 percent, a few points above even dominant Universal Music. The only bad news was a few thousand layoffs, but that's the price of making two companies stronger, right? But the executives miscalculated. Sony's Lack and BMG's Schmidt-Holtz may have been pals, but in the ranks underneath them, some of the fiercest compet.i.tors in music industry history were suddenly partners, conducting business with tight smiles. Clive Davis, who had started his career nurturing Bob Dylan and Streisand at Columbia and had discovered Whitney Houston with Arista Records in the 1980s, was the head of BMG. Don Ienner, a Sony Music company man who had been one of Tommy Mottola's loudest and most cutthroat loyalists, was in charge of Columbia and Epic. Making matters worse, Ienner had worked for Davis in the early 1980s at Arista, and had no intention of taking a subservient role this time. Things were uneasy whenever they found themselves at meetings together. ”One side of the room was Clive and his people. The other side was Donnie and his people,” recalls Joe DiMuro, executive vice president of the merged company's strategic marketing group until he left in late 2006. ”There was a level of cordiality, but you could tell there was a dividing line. It was palpable.”

Lack, who had been appointed boss of the newly merged company, found himself in a no-win position smack in the middle of these two suspicious cultures. He might have made it work if he'd had the clout and charisma of a Davis or a Mottola, but his lack of record business experience rankled the more seasoned executives below him. One of those was Michael Smellie, a BMG executive since the mid-1990s who'd worked his way up to chief operating officer in the merged company. ”The two of them, in many cases, were like oil and water,” DiMuro says. ”Michael, at times, was reporting to Andy, and Michael became frustrated and disenchanted. There was a level of noncommunication. They shut down at times.” (Some on the Sony side believed the compet.i.tive Smellie did everything he could to set up Lack for a fall.) Lack was no technology expert-his comments before Congress likening peer-to-peer services to child p.o.r.nographers weren't exactly forward-thinking-but he was smart enough to grasp that technology represented the future of the business. For a time around 2003, Lack developed an interest in selling songs through those very same peer-to-peer services-this time using ”fingerprinting” technology that could separate the customers from the pirates. He started contacting people who knew about this kind of technology-Talmon Marco, head of iMesh, which the RIAA had sued in 2003; Vance Ikezoye of Audible Magic; and Wayne Rosso, the cigar-smoking record-business veteran who, as head of Grokster, had likened record executives to Josef Stalin. Rosso spent some time with Lack, introducing him to the key players and acting as a go-between for meetings with Sony executives. ”Andy was the key mover and shaker in loosening things up,” Rosso says. ”He was trying to do the right thing. He met with resistance all the way through.” Lack's efforts failed, as did his other clumsy high-tech innovations. He flooded stores with new releases using the CD-plus-DVD DualDisc format. They didn't help sales, and the format basically disappeared. What cut off his head at Sony, though, was a very traditional decision-Lack resigned Bruce Springsteen, who was inarguably past his prime in selling new alb.u.ms-for $100 million.

Lack could have been the greatest record executive in the world, and he still wouldn't have been able to pump up Sony BMG's bottom line as piracy and iTunes cannibalized CD sales. He kept cutting costs, which stopped the bleeding somewhat but didn't exactly improve employees' spirits. Publicists, for example, watched budgets for artist photo sessions drop from $25,000 to $5,000 in just two or three years. No longer could they spend more than $5,000 to fly an artist to New York or Los Angeles for a prominent late-night TV appearance. Instead of giving away thirty tickets to a concert, they could give away eight. And their coworkers kept losing their jobs, day after day. Sony's US market share dropped from 30 percent to 27 percent in 2005. Finally, Sir Howard Stringer decided he'd had enough.

In early 2006, he switched the jobs of Schmidt-Holtz and Lack, giving Schmidt-Holtz chief executive power over the entire company, and turning Lack into a ”nonexecutive chairman” with relatively little power. Although he remained with the company, Lack was, for all intents and purposes, done as a record mogul. By summer, so were Don Ienner and Michele Anthony, the two primary holdovers from the Tommy Mottola era, who couldn't stand it anymore and left. Their replacement was Stringer's younger brother, Rob. Within a few short years, the Mottola team of experienced, hard-nosed music executives was gone. Some in the business mourned the departure of the cla.s.sic record men. Others wondered why it took so long to get rid of Tommy Mottola's team, which was about as far as the record industry could get from technology gurus.*

THEN THINGS GOT really bad. really bad.

In the iTunes era, old-school distribution and manufacturing were suddenly relics. Since the early 1970s, record-making plants had been cash cows for major labels. So had complex s.h.i.+pping networks of warehouses and branch offices around the world. But in 2004, EMI closed CD-manufacturing plants in Jacksonville, Illinois, and Uden, in the Netherlands, and laid off 900 workers. Around that time, AOL Time Warner sold the company's once-mighty CD-distribution arm, WEA, to a Canadian company called Cinram International for $1.05 billion-a.n.a.lysts called it a steal, until CD sales dropped 15 percent in 2007. Later, with backing from a wireless company called Glenayre Technologies, former Warner and Island Def Jam executive Jim Caparro formed the Entertainment Distribution Company and bought what was left of Universal Music's plants and warehouses, plus the employees who worked in them, for $122 million. The deal worked great for a few years, until the company posted a net loss of $11.4 million, forcing Caparro to step down in 2008. ”Darwinian evolution took hold,” Caparro says of the record industry, which he lambastes for not embracing digital music quickly enough. ”Things changed.” As for CD-manufacturing plants, some remain open, including Sony's pioneering one in Terre Haute, Indiana. It survives not on CDs but DVDs. But maybe not for long. Even US DVD sales dropped 3.6 percent in 2007-although Sony executives have said the movie industry's adoption of the Blu-ray format in February 2008 may lead to expansion of the 1,200-employee Terre Haute plant.

Old-school marketing fell just as hard. For as long as anybody in the business could remember, labels relied on MTV, radio, and record stores for exposure. Push the gatekeepers at those places aggressively enough-in some cases, bribe them-and you've got a hit. The first to go was MTV. Beginning in the late 1990s, the channel's executives realized they could snag higher ratings with self-produced reality shows like The Real World The Real World and and Road Rules Road Rules than by actually playing music videos. Labels went from spending $1 million on a typical video for an MTV-worthy artist in the early 2000s to $100,000 or $200,000 in 2007. ”It's a very precarious and somewhat unfortunate development,” says Randy Sosin, Interscope's senior vice president of music video production until he lost his job in late 2007. ”The cost of making a film has gone up, but the dollars that they're spending have gone down.” MTV still breaks artists like emo-pop band Paramore and rapper Common, but often through tiny commercial snippets in the middle of shows like than by actually playing music videos. Labels went from spending $1 million on a typical video for an MTV-worthy artist in the early 2000s to $100,000 or $200,000 in 2007. ”It's a very precarious and somewhat unfortunate development,” says Randy Sosin, Interscope's senior vice president of music video production until he lost his job in late 2007. ”The cost of making a film has gone up, but the dollars that they're spending have gone down.” MTV still breaks artists like emo-pop band Paramore and rapper Common, but often through tiny commercial snippets in the middle of shows like A Shot at Love with Tila Tequila A Shot at Love with Tila Tequila.

Then the major labels' long-standing relations.h.i.+p with radio stations. .h.i.t a cataclysmic snag. For decades, they relied on independent promoters to ”persuade” radio programmers to add their singles to their playlists. By the 1990s, the big indies were corporate, clean-image types like Bill Scull and Jeff McClusky, who figured out they could make the most money by hooking up with one big radio company, like Clear Channel or Entercom. By 2001, the mathematics of indie promotion looked like this, according to Eric Boehlert of Salon.com: Of 10,000 commercial US radio stations, 1,000 were the tastemakers that broke hits and moved CDs; those stations added roughly three new songs per week; labels paid indies like Scull and McClusky between $1,000 and $8,000 to add a song to a station's playlist. So the top indies, a handful of entrepreneurs including Scull, McClusky, and Bill McGathy, received roughly $3 million every week every week.

This lucrative relations.h.i.+p lasted as long as major labels had that kind of money to spend. But in the early 2000s, as McClusky remembers, ”Costs start becoming more of a consideration.” They stopped wanting to pay independent promoters-for real this time. It helped that senators such as Democrat Russ Feingold started to look into ”legal payola,” finding it uncomfortably close to actual actual payola. Congress pressured the big media companies, like Clear Channel Communications, which owned 1,225 stations and received millions of dollars a year from major labels through indie promoters. In 2003, just before the Federal Communications Commission voted on a measure to relax rules for radio, payola. Congress pressured the big media companies, like Clear Channel Communications, which owned 1,225 stations and received millions of dollars a year from major labels through indie promoters. In 2003, just before the Federal Communications Commission voted on a measure to relax rules for radio,* the San Antonio company turned against indie promo. Most of the other big radio companies followed. Thus did onetime power players like Scull and McClusky resign themselves to, well, making less than millions of dollars per week. ”We were too greedy,” Scull says today, with resignation. the San Antonio company turned against indie promo. Most of the other big radio companies followed. Thus did onetime power players like Scull and McClusky resign themselves to, well, making less than millions of dollars per week. ”We were too greedy,” Scull says today, with resignation.

It was nice, for the bean counters at major labels, to give up a budget item of millions of dollars every year. It was not so nice for label promotion departments with singles to break. They decided to keep up the pressure on radio programmers-only without the middlemen who knew what they were doing. They went back to $50 handshakes or their modern equivalents. At one point, an Epic Records executive spent $5,000 on New YorktoMiami trips to get rock bands Franz Ferdinand and Good Charlotte on the air. Another time, two Epic executives wrote a memo to programmers listing ”fixed billing rates” of $500 to $1,000 for 75 or more airings of a record, or ”spins,” on a station. One especially indiscreet Epic promotions director asked a Clear Channel radio station employee in an email: ”WHAT DO I HAVE TO DO TO GET AUDIOSLAVE ON WKSS THIS WEEK?!!? Whatever you can dream up, I can make it happen!!!” In another email, a Top 40 program director for a Rochester, NY, station wrote: ”I'm a wh.o.r.e this week. What can I say?” Some labels paid radio programmers thousands of dollars in cash, Las Vegas airline tickets, laptops, and Walkmans to push artists from Audioslave to J. Lo into heavy rotation. Whatever you can dream up, I can make it happen!!!” In another email, a Top 40 program director for a Rochester, NY, station wrote: ”I'm a wh.o.r.e this week. What can I say?” Some labels paid radio programmers thousands of dollars in cash, Las Vegas airline tickets, laptops, and Walkmans to push artists from Audioslave to J. Lo into heavy rotation.

This bald-faced bribery continued until Eliot Spitzer, attorney general of New York, found himself a new campaign issue. A Democrat who had successfully crusaded against investment-banking researchers over their Wall Street conflicts of interest, Spitzer was on the path to becoming governor, and payola was the perfect issue for him. It was secret and widespread, fit snugly into headlines, and made important people like FCC commissioners and US senators good and angry. Spitzer subpoenaed all of New York's major record labels, as well as the big radio companies. He demanded emails and doc.u.ments, and they complied. His staff interviewed tons of people. His evidence was enough to strong-arm the major labels. They settled. Sony BMG was first, coughing up $10 million in July 2005. Sony Music's top executives, Don Ienner and Charlie Walk, fired sacrificial lamb Joel Klaiman, head of radio promotions for Epic Records, allowing Spitzer to say he drew blood from the record business. But shortly after Spitzer's investigation became public, the Los Angeles Times Los Angeles Times broke an extraordinary story based on anonymous sources, reporting that Walk and Ienner ”condoned or partic.i.p.ated in pay-to-play.” One source claimed to the paper: ”Donnie would tell you: 'Do whatever it takes. Get the song played.'” Another source added that Ienner would say, ”I've approved $50,000 this year for that [program director], and when we're developing this baby band, we get nothing. Tell him if we don't get spins, we're cutting his support.” Ienner and Walk denied the allegations to the broke an extraordinary story based on anonymous sources, reporting that Walk and Ienner ”condoned or partic.i.p.ated in pay-to-play.” One source claimed to the paper: ”Donnie would tell you: 'Do whatever it takes. Get the song played.'” Another source added that Ienner would say, ”I've approved $50,000 this year for that [program director], and when we're developing this baby band, we get nothing. Tell him if we don't get spins, we're cutting his support.” Ienner and Walk denied the allegations to the Times Times and did not respond to interview requests for this book. In any case, after the Sony BMG settlement came Warner, later that year, paying $5 million; EMI, Universal, and several big radio companies added more millions later to New York charities devoted to music education. and did not respond to interview requests for this book. In any case, after the Sony BMG settlement came Warner, later that year, paying $5 million; EMI, Universal, and several big radio companies added more millions later to New York charities devoted to music education.

Spitzer, of course, would bring a few secrets of his own to the governor's mansion in New York. As most of the world knows by now, this crusader against corruption was disgraced in early 2008 when he was caught paying for a high-priced prost.i.tute. Ironically, the woman, Ashley Alexandra Dupre, was an aspiring singer-songwriter, and after the Spitzer scandal broke, she received more than 7 million hits on her Mys.p.a.ce page. The resulting 98-cent song downloads, according to the New York Daily News New York Daily News, added up to more than $206,000 in pure profit.

But hookers and political scandals aside, the Spitzer-led payola settlements suddenly left major labels without a crucial radio tool beginning in 2005. Soon, promotion executives at labels noticed stations around the US were becoming more conservative, adding fewer new singles, repeating more of the old, popular ones, and keeping their label contacts at arm's length. For the first half of 2006, Radio & Records, Radio & Records, a trade magazine that uses computers to study airplay, noticed newly added radio singles were dramatically down-in most of the big formats, from rock to hip-hop to country to adult contemporary. Spitzer's investigation made programmers paranoid. Radio companies made their vice presidents of operations sign a form whenever a programmer received a box of CDs. ”Songs aren't just getting on the radio as quickly as they did before,” says Doug Podell, operations manager for Detroit rock station WRIF, adding that the bands Flyleaf, Powerman 5000, and Army of Anyone were victims of this new conservatism. ”The labels are scrambling,” a source at a major label said at the time, ”and we're all freaking out.” Radio was still the most reliable way to break an international hit-hard-rock band Flyleaf, R&B star Chris Brown, and pop acts James Blunt and Maroon 5 broke on the air over time-but this key promotional outlet was no longer a sure thing for big-spending major labels like it had been in the 1980s and 1990s. a trade magazine that uses computers to study airplay, noticed newly added radio singles were dramatically down-in most of the big formats, from rock to hip-hop to country to adult contemporary. Spitzer's investigation made programmers paranoid. Radio companies made their vice presidents of operations sign a form whenever a programmer received a box of CDs. ”Songs aren't just getting on the radio as quickly as they did before,” says Doug Podell, operations manager for Detroit rock station WRIF, adding that the bands Flyleaf, Powerman 5000, and Army of Anyone were victims of this new conservatism. ”The labels are scrambling,” a source at a major label said at the time, ”and we're all freaking out.” Radio was still the most reliable way to break an international hit-hard-rock band Flyleaf, R&B star Chris Brown, and pop acts James Blunt and Maroon 5 broke on the air over time-but this key promotional outlet was no longer a sure thing for big-spending major labels like it had been in the 1980s and 1990s.

With MTV and radio changing, only one huge, reliable promotional outlet remained: record stores. Surely, thought label executives, chains like Tower, Wherehouse, and Sam Goody would push new music like they had since the 1940s. Unfortunately, during the CD boom, labels had s.h.i.+fted their resources away from these steady music-only chains and towards mega-sellers such as Best Buy, Wal-Mart, and Target-which were in the mood to slash prices and cut CD shelf s.p.a.ce. Hundreds of record stores went out of business. In January 2006, Musicland went bankrupt, taking the venerable Sam Goody chain with it into anachronistic oblivion.

And then came the fall of Tower Records, the red-and-yellow chain that had become an inst.i.tution. Founder Russ Solomon, a big music fan, first began selling records in 1941 in the back of his father's drugstore in Sacramento. He opened his first store in Sacramento in 1960, and emphasized deeper catalogs than his compet.i.tors. He started branching into other cities in the late 1960s, notably San Francisco, where he stumbled onto a Fisherman's Wharf ”for rent” sign while nursing a hangover. He leased the s.p.a.ce, opened a store, and turned it into a hangout for Haight-Ashbury musicians such as Carlos Santana, Steve Miller, and members of Jefferson Airplane. Its most famous location, on the Sunset Strip in Los Angeles, opened in 1970, and it became a local music centerpiece-Axl Rose of Guns N'Roses once worked there as a night manager, and the store opened early for Michael Jackson to shop by himself during the Thriller Thriller era. Elton John and the Beach Boys' Brian Wilson were among the best-known customers, and the Hollywood location took on its own mythology. Rose's onetime bandmate Slash has a childhood photo of himself in the store, begging his record-collecting parents for certain alb.u.ms in the aisle. A few years later, he was arrested for stealing ca.s.settes. Still later, he worked with a crew of big-haired metalheads at the video store across the street. ”We happened to be funny-looking, but met the right requirements,” he recalls. ”It was something they should have made a movie out of, like era. Elton John and the Beach Boys' Brian Wilson were among the best-known customers, and the Hollywood location took on its own mythology. Rose's onetime bandmate Slash has a childhood photo of himself in the store, begging his record-collecting parents for certain alb.u.ms in the aisle. A few years later, he was arrested for stealing ca.s.settes. Still later, he worked with a crew of big-haired metalheads at the video store across the street. ”We happened to be funny-looking, but met the right requirements,” he recalls. ”It was something they should have made a movie out of, like Clerks Clerks, but a little bit more rock 'n' roll and a little bit more mayhem.”