Tommy Boy Can CD Future

"I learned a million lessons," says Silverman of Tommy Boy's mid-eighties slump. "I learned not to produce records. I learned that it doesn't matter what I think is a hit. We have to understand the American public and understand what they're looking for, what would appeal to them, why they would buy a record, and not try to impose our vision on them."

Silverman learned his lessons at the right time. As in so many industries - from semiconductors to retailing to steel - powerful new forces have swept through the recording industry over the last 10 years and obliterated the assumptions around which the establishment was organized. The major labels were disoriented by these forces. Tommy Boy came of age alongside them.

For decades, strategy in the music business has revolved around record charts and radio airplay. But no means ever existed for accurately tracking either. Two pieces of information technology, both new in the 1990s, introduced an unfamiliar variable into the strategic equation: truth. The result was fairer competition - and a dramatic power shift.

Sound Scan, a Hartsdale, NY company, opened for business in 1991 and changed the charts forever. For more than 30 years Billboard magazine, the industry bible, had compiled its charts by surveying selected record stores around the country. The system was sloppy and inexact - store employees provided rankings, not unit sales, and they sometimes ignored entire musical genres or simply reported records that the store had overstocked. Worse, the system was corrupt: big labels used big money to influence the employees of reporting record stores. The majors grew accustomed to buying the illusion of chart success and hoping that reality would follow.

At a stroke, Sound Scan ended the undue influence of power and money on the charts. When real sales, not the illusion of sales, became the standard of measurement, the map of the industry changed. Rap and country shot to the top of the charts. Though rock remained the most popular genre, it declined steadily, falling to 33% of the market last year from 48% in 1988. Indeed, since Sound Scan appeared, independent and quasi-independent labels have tripled their market share.

"It's easier to start an independent label now," says Silverman. "If you have a hit record, you get credit for it."

A different company, Broadcast Data Systems (BDS), has brought truth to radio. Prior to BDS, radio airplay charts were largely the province of Radio & Records, an industry tipsheet that relies on reports from program directors at radio stations. Record industry executives, and the independent promoters who are paid large sums of money to gain airplay for a record, zealously sought to influence airplay reports. Despite the publication's vigilance, the system was always open to abuse and riddled with illusions.

BDS shattered those illusions. Using the military's audio print technology, first developed to detect enemy submarines, as in Tom Clancy's The Hunt for Red October, BDS monitors radio airplay in the 100 top radio markets in the United States. Each time a record airs, the system detects it, registers the time of day, and cross-references it with the Arbitron rating system for each radio station, producing precise airplay information about every song played in major markets. During one week last spring, for example, Naughty by Nature's "Hip Hop Hooray" was played on black radio 872 times and accumulated 17,890,000 individual "hears" or gross impressions, the second highest number for a rap song that week. On Top 40 radio, the song aired 1,548 times and racked up more than 27 million gross impressions, the 11th highest number for any record that week.

Other changes reinforced the democratizing impact of information technology. As consolidation in the music business during the 1980s spread to retail channels, the majors' once-powerful stranglehold on distribution became less relevant. In fact, their far-flung warehouses and elaborate shipping systems, designed to accommodate the formerly messy and inexact business of retailing, looked more like a liability than an asset.

Today, Tommy Boy can achieve nationwide distribution through 45 accounts. To service Musicland - with more than 800 outlets, the largest record store chain in the country - Tommy Boy ships to only two locations. And armed with its precise, home-grown, market-by-market analyses, the label can tell the chains how to allocate its records throughout the country.

"The sledgehammer just doesn't work anymore," says Silverman. "While you're swinging a sledgehammer, I can run around you three times and kick you in the rear."