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Music Data Being Altered, Some Say

Records: Industry execs say major labels are involved in scheme to manipulate SoundScan sales numbers.

July 13, 2001|CHUCK PHILIPS | TIMES STAFF WRITER

That big hit record rocketing up the Billboard magazine music charts may turn out to be a dud that's getting some behind-the-scenes help.

Top record industry officials told The Times they are aware of instances in which major labels have attempted to manipulate sales figures.

These music executives say there is a coterie of independent consultants and merchants from Los Angeles to New York who have developed a system to distort sales numbers that are reported to SoundScan, the research firm that was supposed to clean up the once-shadowy world of music sales.

There's nothing complicated about the scheme: It involves retail clerks swiping a CD numerous times across a scanning machine to falsely boost sales figures.

"What you have here is an industry basically lying to itself," said George Zamora, president of WEA Latina, the U.S. sector of AOL Time Warner Inc.'s Latin music division. "It's a real problem. It's happened a number of times. In Los Angeles. In New York. In Puerto Rico."

Billboard magazine chart chief Geoff Mayfield said he also is aware of efforts to distort sales figures. "I am very disappointed . . . to know that record companies may be attempting these kinds of shenanigans."

SoundScan Chief Executive Mike Shalett acknowledged that the company has found troubling anomalies in record sales data. And Shalett said he is hearing reports among industry insiders that the major record labels are hiring outside consultants to manipulate the numbers.

Representatives of the five major record companies all denied knowledge of any label in their organizations participating in any schemes to enhance sales figures.

It is unclear how often manipulation occurs or how many record companies participate in efforts to distort sales figures.

Shalett declined to name which labels or retailers may have participated in schemes to falsely drive new releases up the charts featured in Billboard magazine.

But Shalett said, "We've seen anomalies in the sales figures. We have security measures in place, though. We catch them. . . . Let me put it like this: Some stores that used to report to SoundScan no longer do."

Shalett refused to say how many stores have been eliminated from the company's tracking system.

SoundScan is the record industry equivalent of the Nielsen ratings for television programs.

Placement on the Billboard record charts affects the amount of play a song receives on the radio, orders from retail outlets and the reputations of artists and label executives. And the fraudulent maneuvers affect the quality of data that companies pay millions of dollars to obtain.

Several executives familiar with the process say it works like this:

A label hires an independent consultant to ship boxes of free CDs of a new release to a select group of small, independent record stores across the U.S. The retailers, in return for the free merchandise, agree to swipe each CD numerous times over bar-code scanning devices at cash registers to make it appear as if more copies of the album are sold. The trumped-up sales figures are then fed into SoundScan's computerized accounting system.

"Some stores are scanning a single CD numerous times to falsely distort the sales numbers," said Sony Discos Chairman Oscar Llord. "It's got to stop."

Through these techniques, a record can be pushed up as many as 10 positions on the charts, which could be enough to get a CD into the coveted top 10.

Although there are no laws that specifically prohibit the manipulation of sales data, the practice could have broad ramifications for the music business. SoundScan is widely regarded as the most trustworthy gauge of consumer tastes, helping determine which acts should get radio airplay and which CDs retailers ought to stock. Record companies, artist managers and radio stations pay handsomely--$10 million annually--for the data because it is believed to be precise and tamper-proof.

"If ever there was an industry that needed accurate sales information, it's us," said Jheryl Busby, former head of urban music at DreamWorks. "One thing we can't afford to do is waste money hyping stuff that's not real."

The marketing scheme is a throwback to an era before SoundScan existed. Before the research firm's arrival 10 years ago, the hype-driven industry's charts were based entirely on verbal reports made by retailers, which executives say were easily corrupted with gifts and money from record labels.

SoundScan introduced a computerized system to register sales. The company tracks sales in 18,000 music stores, extrapolates the data using weighted samples and delivers a final tally to subscribers every Wednesday morning.

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