http://www.nytimes.com/2004/07/12/business/12barcode.html

http://news.com.com/2100-1023-246983.html?legacy=cnet

http://musicians.about.com/library/weekly/aa072201f.htm

http://www.recordlabelresource.com/getting-a-bar-code.html

Other than producing the weekly rating charts reported to Billboard, and thus the Top and Hot artists, there is some degree of confusion among journalists and music consumers as to how and why SoundScan was created and how it functions in the marketplace. Online independent artist development guru Tim Sweeney, in an article titled "The Importance Of SoundScan For an Independent Artist," called SoundScan a, "system set up by the recording industry to help measure and verify record sales from the barcode on the CD." The common misunderstanding is that SoundScan, a point-of-sale cash register scanning system used to determine the number of units sold at various retailers, is an industry-created auditing system. While SoundScan is an independent company, it's primary source of income is the major labels and industry trade publication Billboard, and it will be show how this relationship, be it parasitic, symbiotic or simply looping, creates a biased report of the 'whole music industry' which SoundScan purports to track.

SoundScan was developed in 1987 by Mike Shallet and Mike Fine, a former label boss and Gallup pollster respectively, from an idea tossed away by Billboard at the National Association of Recording Merchandiser' (NARM) convention (Haring 197). Billboard had been responsible for compiling and reporting the music charts since the 1940s and was sitting on an idea to revolutionize their figures by counting sales data rather than soliciting the often biased (or appliance-bribed) opinions of record store clerks whose weekly oral reports of what sold in their stores had constituted the objective for over 40 years. After a brief feud over the development of such data collection services, Billboard admitted their late-entrance defeat and, since 1991 has deferred to SoundScan for ranking the country's top artists.

The SoundScan collection method is a product of the modern industrial computerization of product tracking and was born at time just before the CD format would overtake cassettes and vinyl (1993) as the lead method of distribution for albums and singles. The company uses data collected from digital UPC or SKU barcodes on the backs of music media, tallies the number of each sold and reports these figures via dial-up modem or FTP transfer to SoundScan's headquarter. There, hundreds of genre and location-specific and sales charts are compiled and made accessible to subscribers each Wednesday. Retail outlets participating in SoundScan's data collection trade this valuable market information for access to the compilation of all data – trading the local view for a national or, as SoundScan expands to Canada, Japan and England, international view of music sales, In 1997 this worldwide tally accounted for 53 percent of all retail sales, according to SoundScan (Sorkin, 8/11/97).

SoundScan has created a national monopoly on the sales statistics by making their participating retailers sign exclusive contracts to not share any of their sales data. According to the New York Times, SoundScan boasts that between 85 to 90 percent of American music retailers contribute their weekly takes to the system. Unsurprisingly, many American retailers were reluctant to join the SoundScan system as the objective and scientific information gathering would cut out their taste-making function, but the company offered something far more tangible than what Billboard had, i.e., cash. SoundScan pays each of its estimate 14,000 participating retailers for their loyal reporting of data. This can range between several hundred to several hundred thousand dollars, depending on the share of the market each store represents. (Sorkin, 8/11/97). The money to pay retailers comes from the prohibitively high cost of subscribing to a full SoundScan data and analysis membership. The cost is rated according to the size of each company, and in 1991 this amounted to around $800,000 per major label per year (Holden, 6/22/91). While smaller companies are given better rates, and various levels of information are offered, the overwhelmingly high cost of SoundScan data has come to assure that only the highest grossing media companies can afford the deep, all encompassing look into the music market.

SoundScan is now a part of the Nielson market research conglomerate bought by the Dutch company VNU in 1999. The company reports annual revenues of 4.3 billion, over half of which is reported to have been generated in US markets. Nielson also owns BookScan, VideoScan and Broadcast Data Systems (BDS), the latter of which is "the leading provider of off-the-air music tracking for the entertainment industry," which captures over 100 million song detections annually on more than 1,200 radio stations in 130 markets. (Neilson BDS). It is largely responsible for the creation of "Top 40" playlists and other radio format lists and the data collected from BDC is combined with sales reports to create Billboards coveted Hot 100 list. With vertically-integrated product scanning and data analysis systems, Nielson is poised to serve large, international media conglomerates in nearly every aspect of their production and marketing.

While SoundScan was immediately embraced by the music industry as the most important tool in predicting hits, minimizing risk and controlling markets, its literary analog, BookScan, was met with a slightly more suspicious air. The publishing industry has been a place of lore, strong personalities and deep-seated belief in the support of new voices in the market. When, in 1997, BookScan began to negotiate with retailers and publishers about the control of data and the effects of precise market reports, a spokesperson from Simon & Schuster gave voice to the industry in this way. "Historically, publishing has been all art and no science…After all, what we're selling is ideas, not cans of soda pop. But books are products, too. Our idea factories, if you will, can benefit from the same kind of sales data used by the potato chip factories to manage their inventory." Perhaps it is important to note here that Simon & Schuster is part of the Viacom conglomerate which owns and operates such media venues as MTV and Blockbuster, both of which rely almost exclusively on SoundScan and VideoScan reports to create their playlists and orders (Carvajal, 7/16/97). Here perhaps we here a sign of resignation as a formerly stubborn, loss leading industry in the business of culture comes in line with other parts of its vast empire. Everybody's gotta look at the numbers.

Of Potato Chips and Pop: How SoundScan changed the music industry in the 1990s

EMI Music president and CEO Jim Fitfield, who came to the music world from General Mills, pointed out the contrast between the recording industry and other major retail industries. "This business, in my opinion has been slow in responding to the more professional management techniques that exist in other industries which are equally as creative. It's hard to imagine that SoundScan…has just come to this industry three years ago, when it's a $10 billion industry. Now [companies] look at their inventories, they know exactly where they sit. It's no longer done with mirrors and B.S." (Haring, p. 84).

The smoke and mirrors game of the old Billboards charts was all in the reporting. As Tom McCourt and Eric Rothenbuhler wrote in their article "SoundScan and the consolidation of control in the popular music industry," the most important thing that SoundScan data did was reposition rap and country in a formerly rock-dominated chart. Because most of the majors were focused on the development of new rock acts, and most record stores reporting to Billboard were suburban or mainstream 'rock' centered shops, "Clerks often failed to report music that wasn't perceived as 'pop,' so sales of particular music genres frequently were underrepresented" (McCourt, p. 205). When, in May 1991, the new charts came online, it was only because of Michael Bolton that the number one artist was not country. It is perhaps the only time any rockist type will say "Thank God for Michael Bolton," because many of the new artists coming from the majors, in the rock or pop formats, were swept away in the face of strong, loyal specialty markets that had not been perceived in record shops (Holden, 6/22/91). Critics claimed that the early reportings by SoundScan were too heavily weighted to the Southeast (with about 40 percent of stores nationwide reporting), but within months SoundScan had brought another 20 percent online and yet the chart changes did not reverse in favor of rock n' roll.

Another side effect of the change in chart tabulation was a shift in how the industry perceived hits. Prior to SoundScan, it was believed that hit songs and albums rose and fell gradually over time. Shortly after the introduction of the system, The Economist called this model "an illusion created by bad information" (12/01) as it was shown that many hits entered the charts in the top 10 and that the most significant indicator of success was not this position, but how long the artist stayed their. Because chart positions are tabulated weekly, and not over the length of the album's life on the charts (18 months maximum), it is possible to have a number one hit with as few as 100,000 units sold one week, while another the top spot would have a half million. (Sorkin 8/11/97). This is why the recent report that all slots in the top 10 of the Hot 100 were performed by black artists, a historical first, was discounted by some analysts apparently still hoping for the great white hope of rock. The article quoted pop writer Paul Grein as saying that the Hot 100 is non-essential. It's the Top 200 that matters. "That's where the money is made. The singles chart reflects what's being played on hit-oriented stations which are predominantly listened to by young people.'' His comment was followed by the now current retort that this demographic is, "more inclined to download singles from the Internet than pull out their wallets at a record store" (Barbosa, 10/4/03). The shift between cultural power and prestige, once what the top pop spot indicated, has been reduced only to a signifier of the economic power of a given genre and, in this case, used to discredit the artistic power of black music.

SoundScan was originally touted as the supreme way of cross-feeding of information between retailers, radio, the industry, promoters and merchandisers in what would become a transparent way to understand local, regional and national markets and best exploit these for individual acts. Founder Mike Shalett believed this to be the democratization of the marketplace in the true free market sense, saying, ""We [SoundScan] really brought the consumer into the process. When a person enters a record store in Syracuse and buys a record and it's scanned, we've put that person directly in touch with the artist, with the record company" (LaRue, 1/4/92). The article, written only eight months after SoundScan's start, reports that both Bryan Adams and Garth Brooks were given extra play on local 93Q due to their high ranking positions on the local SoundScan charts. Perhaps less banal were reports that in certain markets a breakthrough record by Seattle band Nirvana were selling up to four times more than Metallica. Nirvana's label Geffen used this to push the unknown band onto traditional rock radio stations and thus, opened the door to other 'grunge' bands. In this instance, if not with Bryan Adams, the people won out by getting to hear an independent artist crack through to the top.

SoundScan, as many critics have pointed out, is not in the business of helping independent artists rise through the ranks, but instead can have the reverse effect of shutting out even major artists if they do not perform well in the first few weeks of release. Because sales charts form a feedback loop between radio, a few disappointing weeks of sales, or a slow and steady number of sales over time, can destroy both new and older artist alike because they fail to ascend or even chart on Billboard. Under the old system, the often inflated counts were used in early weeks to attract radio's attention to a track, giving new and unheard artists a chance to create a positive feedback loop which would then support itself. Journalist Jim Farber calls the current first week paranoia of "downbeat Darwinism" where only instantly popular acts survive and artist development means a one off pre-album marketing blitz. Negative chart points create a snowball effect as MTV, hit radio stations and other industry marketing devices program only those artists that they perceive to be on the verge of a hit. As Farber reports, the industry is volatile and paranoid enough that this can mean even talented artists whom the label believed in can get dropped. (Farber, 4/1/96) Like the publishing industry, the music industry had long been run by visionaries (and hustlers) with faith in their talent and a way to grease wheels to get hits going. Now that SoundScan has become the primary source of chart information, it is used to determine futures of artists as if the product being sold were just another can of soda needing more marketing. SoundScan has enabled non-creative industry management to attempt regulation of a market whose entire audience buys for taste, talent, and time. SoundScan cannot chart these intangibles and thus the industry that relies on sales charts is stuck in an infinite reactionary loop. Thus Marc Geiger, A&R man at American Recordings and key figure behind Lollapalooza, called SoundScan, " "a wonderful tool. But like any tool, there's use and abuse. The industry has to learn how to ignore SoundScan . . . when the case warrants…In the end, the best music is developed not from numbers but from a feeling in the gut."