Understanding the Charts: Retail Sales and the Performing Songwriter: Part 1

As featured in: Performing Songwriter Issue #60, March/April 2002.  Visit performingsongwriter.com to order back issues or subscribe.

By Bill Parsons

Part 1 | 2

Arthurian knights had the Holy Grail. Minor league ball players have The Show. Performing songwriters have The Charts--a romantic quest in which success is reserved for the few, and where untold glory awaits those who reach their destination.

This is a column about retail sales charts. Not airplay charts, mind you. For this column, we’re not so much interested in what radio stations are spinning as we are in what record stores are selling-- although the two are often linked. (For more on radio, see Volume 8, Issues 51 and 54; and Volume 9, Issue 56.) Since many artists build careers without much personal benefit from the charts, a substantial number of performing songwriters wind up viewing the charts through a lens of distant curiosity, outright scorn or secret envy. But at the end of the day, none of these reactions are focused enough to pierce the shroud surrounding the true operation and purpose of retail charts. Who puts the charts together and why? Where do they come from and how do they work? Who uses them and for what purpose? And how can smart performing songwriters integrate retail charts into their overall career plans?

Read on, fellow pilgrim. The journey is long. The destination--uncertain. But the quest is honorable. And the answers you seek await you along the road. Please, step right this way .…

Who Puts the Charts Together and Why

Retail sales charts are generally compiled by what industry types calls “the trades"-- publications like Billboard, Hits Magazine, The Album Network or The CMJ New Music Report. Additionally, a few niche charts can also be found in genre-specific magazines like No Depression or Bluegrass Now. From a distance, the charts might appear to be something like an industry-sponsored popularity contest--an exclusive party to which most artists never get invited. But if you really want to understand the charts, it is probably more useful to look at them the way the pros do--as highly valued market research.

You see, popularity contests are fun enough. But the real reason the trades go through all the trouble of collecting, compiling and publishing retail charts is because they contain incredibly valuable information. Information they can sell-- in their magazine, on their website or by subscription. Record labels, radio stations, managers, agents, distributors, retailers, talent buyers and artists all make important decisions based on the sales data they read in the retail charts every day. We’ll get to that in a minute. But first, it’s important to understand where the charts come from and how they actually work.

Where the Charts Come From and How They Work

Before any trade can publish a retail chart, it must first assemble what is known in industry parlance as a “reporting panel"-- a collection of retail stores that agrees to provide that trade with sales information on an ongoing basis. Why would a retailer agree to participate on a reporting panel? Some retailers are financially compensated for their trouble. Others get access to the totality of the trade’s market data their information helps create, which in turn helps them with their own stocking decisions. Still others believe that participating on a reporting panel will increase their store’s profile within the industry and therefore be more likely to attract the attention of record labels whose titles they want to carry and whose advertising dollars they’d like to earn. Finally, there are plenty of stores who just want to tap into the larger musical community of which they are a part. Obviously, a chart is only as meaningful and reliable as the information used to create it. So the larger and more inclusive the reporting panel, the better the chart.

Without prejudice to any of the other worthy trades out there, it isn’t really going out on a limb to say that Billboard’s charts have emerged as the industry standard. That’s because Billboard compiles the largest number of charts, and its reporting panel is the most extensive in the nation-- thanks to its exclusive publishing agreement with point-of-sales tracking pioneer SoundScan, with whom it now shares a corporate parent, the Dutch conglomerate VNU. Since Billboard is the industry standard, we’ll use it as our case study for understanding how retail charts work. While other charts might differ from Billboard in terms of their history, market focus, presentation, reporting panels and publication schedules, the over-arching issues facing all charts are pretty much the same.

Billboard started publishing retail charts back in the 1940’s, but its modern chart system really began in 1991. That’s when the company signed its exclusive publishing agreement with erstwhile rival SoundScan. The Billboard-SoundScan partnership very quickly revolutionized the way retail sales data got collected and reported in the United States.

“We didn’t have as precise a system before,” explains Geoff Mayfield, Director of Charts for Billboard. “With the system immediately before SoundScan, we got reports from a broad account base that sold music, but they were giving us bestsellers in order of rank--not specific piece counts. Even if everyone reported pristinely, it wasn’t an ideal system because you could have two similar size chains, where one reports a title ahead of another, while the second chain reports the titles in reverse order. One title really sold more than the other because when you add up the units sold at the second chain with the units sold at the first chain, it’s a bigger amount. But in our system, they’d get the same weight because it’s the same size account. [Also], the charts were somewhat less predictable then because the record companies knew which stores were reporting and could try to influence the reports. As a result, it wasn’t always entirely accurate--especially with what the smaller companies sold.”

Indeed, stories of report tampering in the pre-SoundScan retail era are now the stuff of industry legend.

“In the old days, the offers were ridiculous,” recalls retail guru Brad Hunt, whose WNS Group consults for labels like Praxis,Verve and Dead Reckoning. “The labels would literally back the truck up to the store and it was whatever you wanted--from concert tickets to T-shirts. Some of the majors, who shall remain nameless, would call up about something just released by a brand new artist, and you’d be like ‘Are you out of your mind?,’ and they’d say ‘Well, listen, do you and your wife want to take a trip to Miami?’ That was especially true for the genre and niche stuff.”

Whether due to reality or rumor--or in all probability some measure of both--the conventional wisdom in the music industry is that SoundScan’s use of point-of-sales technology, along with its extensive reporting panel, represented a quantum leap forward for sales data collection. It is a conventional wisdom that SoundScan clearly enjoys.

“Prior to 1991,we call that the BS period-- for Before SoundScan,” quips SoundScan COO Mike Shalett. “Since then, we think the data we provide to the industry is an extremely accurate depiction of what goes on.”

The accuracy of SoundScan’s data is a result of its proprietary reporting panel, which includes mass merchandisers, department stores, national chains, regional chains, independent stores and non-traditional outlets like Internet and venue sales. According to SoundScan, the sales data its panel generates captures somewhere between 85-90% of the retail market in the United States. So, when Tuesday rolls around and the industry’s latest releases hit the streets (by industry tradition, all new product debuts on Tuesdays), the vast majority of stores stocking their shelves will be SoundScan reporters. Each SoundScan store is equipped with point-of-sales technology at its registers that automatically scans the bar code of every product sold in the store-- thereby keeping a seamless tally of which titles are selling, and in what quantities, for the duration of the week (including Monday). At the end of the day Sunday, the electronic tally stops, and the stores transmit their results to SoundScan, which aggregates the information for delivery to Billboard on Tuesday. Billboard spends the rest of the week putting together the charts for its next issue, which shows up on newsstands in major markets over the weekend and to the rest of its subscribers the following Monday.

That, in a nutshell, is how the Billboard chart system works. And by any historical measure, it works pretty well. The point-of- sales technology goes a long way toward eliminating the chicanery of the past, and very few data collection companies can boast of an 85-90% sample. For comparison, if you look at other organizations that try to measure consumer behavior--like Arbitron for radio or Gallup for politics-- you find that they routinely extrapolate conclusions from samples of a few percentage points or less. Even so, SoundScan does have its critics--and there are a few limitations to the Billboard/SoundScan regime worth mentioning here.

First, even if SoundScan is successful at capturing 90% of the retail market, that still leaves 10% of the nation’s retail activity unaccounted for.According to SoundScan, that 10% is comprised largely of independent retailers (though SoundScan will point out that the majority of independent retailers do report to the service) with a smattering of regional chains thrown in for good measure. For this reason, some critics say that SoundScan’s numbers run a little heavy on mainstream music that sells well at the mass merchandisers, department stores and national chains (like country, for example) while under-reporting niche categories that sell better in independent stores--like, say, punk or bluegrass.

Similarly, although Billboard will add and create new charts as its estimation of market activity dictates, not every genre has its own chart. So if you play/perform straight-edge or old-timey music, Billboard doesn’t really have any place to count your sales at the moment--unless you start selling enough units to make Billboard’s early warning Top Heatseekers or Top Independents chart, or cross over to a category they do publish, like when veteran grassers Alison Krauss or Ricky Skaggs start showing up on the country charts.

Third, while SoundScan’s numbers are based on “piece counts,” it is also true that in markets where they know they are not capturing the entire retail picture, the company will try to extrapolate the totality of sales in that market by adding a multiple to the hard data they do have in order to compensate for the sales they believe they are missing. It’s all done in the service of generating the most accurate numbers possible for a given market, but figuring out what multiple to use on what data is as much art as science. You can’t really blame SoundScan for trying to get it right. In fact, they should probably be given credit for making the effort. But the end result of extrapolation is still going to yield an imperfect and approximate answer.

Finally, some managers and artists complain about the way SoundScan’s information gets used. For example, if an artist’s last record didn’t scan very well, a label might balk at signing them--or offer them a deal on less advantageous terms. But managers and artists point out that a weak showing at retail can just as easily reflect lackluster promotion by the record company as the record’s commercial viability. Still, to be fair, this complaint is more about what the numbers can actually tell you than whether they are accurate in the first place.

Part 1 | 2