Matthew Warder
The following guest blog post comes from Matthew Warder, who at one time was lead guitarist for a great indie power pop band called “The Argument.” In addition to providing us with lots of entertainment, he was also my eldest’s bass guitar teacher for several years. I’ll let Matt give you the background on how this post came to be. He’s now a financial and equity markets analyst. Thanks for the post, Matt.
Following a recent blog post – “The Changing Face of Media Ownership” – Dr. Hanson and I struck up a conversation on Facebook about its implications. The blog’s context, you may remember, concerned the red light-green light-red light acquisition of Time Warner by AT&T, the sordid corporate love triangle of Disney, Comcast, and 21stCentury Fox, and the divorce/reconciliation of CBS and Viacom.
Let me start off by saying it’s pretty easy to see why our government has allowed these sorts of deals to happen. While it may scream anti-trust on the surface, we found out during the 70’s and 80’s that smaller companies do have a heck of a lot of trouble staying well-capitalized, and are vulnerable to competitors – and that does not necessarily benefit consumers (or shareholders) at all.
In addition, the larger the number of entities in an industry, the harder it is for government to effectively regulate them. The banking industry leading up to the financial crisis and resulting Great Recession is probably the most obvious recent example.
But the legislation that essentially made these media mega-mergers possible – the Telecommunications Act of 1996 – also had far-reaching effects on other industries that, at least for me, hit a lot closer to home.
I met Dr. Hanson in the early 2000’s, when I was teaching guitar and bass to his eldest son Erik in Morgantown, WV. My band at the time, the Argument, enjoyed a modicum of success in the music industry, touring the East Coast and Midwest in support of our two records, both of which are still available on iTunes (hint, hint; wink, wink).
The Argument on stage
Now, it’s not exactly a trade secret that the business of touring is tremendously enhanced by the business of selling records and merchandise, which is in turn tremendously enhanced by an effective marketing strategy. But it might not be well-known that for most of the industry’s existence, that marketing strategy centered around terrestrial radio.
That’s because from the dawn of radio through the mid-90’s, radio was primarily community-based. Though record industry payola had existed in some form for a long time, regional managers and station managers kept a fair amount of latitude for their own personal tastes and business ideas. And because they were so plugged in to the community, it also meant they knew their demographics better than anyone, and they generally had a good feel for what kind of music would fly on the air, and what wouldn’t.
When it was appropriate, those station managers were great supporters and advocates for musical artists in their community; most especially so when there was a coherent “scene”. Think Chicago in the 70’s (Cheap Trick, Styx, Chicago), Los Angeles in the 80’s (Guns ‘N’ Roses, LA Guns, Motley Crue), or Seattle in the 90’s (Soundgarden, Pearl Jam, Nirvana). All of those bands were at one time local acts who were bolstered by local radio.
The business model of record labels was a little different then. In order to recoup enough investment, labels had to find acts that had the potential to play nationally. And one of the most logical methodologies to use was:
- Start with something already popular;
- Find something similar that’s already working somewhere else;
- Throw at wall;
- Measure relative stickiness.
So it wasn’t exactly a leap of logic for LA-LA land A&R guys in 1988 to think, “Hmmm, this LA hair band thing is winding down…I need to call all my radio buddies here on the West Coast and see if there’s some band up there that will let me keep my awesome job”.
But after President Clinton signed the Telecommunications Act of 1996 (TCA96 from here on out) into law, we immediately saw some of these dynamics change.
The first thing I remember noticing personally was that stations often switched formats. While I was studying jazz guitar at William & Mary, I listened pretty heavily to a small station based out of either Newport News or Norfolk, VA (can’t remember) that had about 4 hours of jazz programming every day. A few months after TCA96 was signed, new DJ’s greeted my Monday lunch with the latest hot 40 hits. The classical station based out of Richmond, VA that I’d frequently put on to study now played country music. The one Tejano station that I remembered in the area became some term called “active rock” that I had never heard before.
No more bluegrass, no more blues, no more folk…no more niche music whatsoever.
What I didn’t realize had happened was that the commercial radio lobby – the National Association of Broadcasters – requested as part of this legislation that the caps on the number of stations one entity can own be lifted…and Congress obliged. Whereas one owner could previously only hold 4 stations in a local market or 40 nationally, those limitations were now eliminated.
In short order, the radio industry went from almost entirely a locally-controlled, community-connected industry to a giant national network where two-thirds of listeners and revenue were controlled by 10 companies.
So at this point, the nature of radio’s business model had to drastically change. Instead of only having to appeal to a concentrated local market – the demographics of which were intimately known by the local station managers – radio now had to appeal to ALL markets, all at once, all the time.
And what’s the one thing that almost all adults in the country have in common?
Most of them have kids.
So instead of the next commercial evolution of grunge, music enthusiasts in 1997 were rewarded for their patronage by such heady acts as…The Spice Girls! They, of course, were followed closely by the Lou Pearlman-managed boy bands (Backstreet Boys, NSYNC), and former Disney Channel child stars like Britney Spears and Christina Aguilera.
In retrospect, that was probably an auspicious year for a recent college graduate to start a power-pop band with legitimate industry goals. But of all the areas in the country where I could do so, I was fortunate enough to do so in an area of the country that was still very community-centric.
My fellow bandmates and I knew most of our local station managers and DJ’s personally. We were welcomed into their world. We supported their local events wholeheartedly. And when we eventually made commercially viable records with legitimate industry producers, we were rewarded with local radio play, which turned into regional radio play, which turned into some record label interest.
Unfortunately, that didn’t quite pan out for us – I’m writing this now as a financial and equity markets analyst rather than the next teenage guitar hero – but I can’t say we weren’t lucky.
What I can say, though, is that the music industry hasn’t been quite as engaging since.