By Beverly Keel

DECEMBER 28, 1999:  Country music executives are beginning their Christmas vacations with a sense of relief, both that 1999 has finally ended and that it wasn't nearly as bad as they feared.

Music Row was gloomy at the beginning of the year. Dropping sales and increasing promotional costs were catching up with labels, which had enjoyed unprecedented success through the mid-'90s. Decca Records shut its door as part of the MCA/PolyGram merger, and Sony/ATV/Tree slashed its roster of writers in half. Just a few top acts--the Dixie Chicks, Shania Twain, Faith Hill, and Lee Ann Rimes--were selling a disproportionate amount of country records.

In 1998, only one new act, The Wilkinsons, had a hit, and even their No. 1 wasn't a gold record. With few new faces breaking through, and many of the industry's biggest acts seeing a 25- to 40-percent drop in sales, no one really knew how bad it was going to get. By mid-year, though, optimism returned as the Class of '99--SHeDAISY, Brad Paisley, Andy Griggs, and Montgomery Gentry--began scoring hits.

As we enter the new year, perhaps the panic has subsided, but a great deal of worry remains. So far, 1999 sales total 35.9 million units, down 8 percent from last year. In addition, country's market share has dropped from about 10 percent to 9 percent.

"It's a flat year, but it's a flat year where people are winding up in a very optimistic frame of mind," says Bruce Hinton, chairman of MCA Nashville Records. "At the beginning of the year, people were wondering where it was going to bottom out. Most people feel we have bottomed out. The proverbial light at the end of the tunnel is very much evident."

Others, however, believe the shakeout will continue for another year, as executives scrutinize the returns on their investments. Fighting to manage costs, which have increased in every area, labels will sign fewer new acts, release fewer albums, and drop several mid-level acts who until recently were selling gold. "I'm looking at this business and seeing how many competitors we have in this town and how much we're all spending," says Joe Galante, chairman of RCA Label Group. "We're not growing the business, so if I'm sitting in New York or L.A., I've got to ask myself, 'Why am I spending this money and not getting the return that I should?' "

Says Allen Butler, president of Sony Nashville: "It's hugely a transitional year. It's a crossroads for a lot of companies to decide how they are going to do business in Nashville and at what level. You'll see some more consolidation with labels and staffs.

"I think from a business standpoint and a musical standpoint next year will be a better year, but then I'm an optimist. I feel like everybody is working so hard to do things right and do things effectively that we almost can't help but have a better year."

While many labels are enjoying comfortable returns, most--with the exception of MCA and RCA--have become reliant on one superstar for the bulk of sales. Warner Bros. has Faith Hill, Capitol boasts Garth Brooks, and Mercury benefits from Twain. "It's a very scary feeling to have your fortune depend on whether one artist delivers a record," Galante says.

Beyond that, labels have become increasingly alarmed by two recent industry developments: the extension of a song's life on the radio and the inability of hit songs to sell records like they did a few years ago. Traditionally, a song would have a chart life at country radio of about 13 weeks, which allowed labels to release about four singles by an act annually. Now a song's radio life has doubled, meaning that only two singles can be released each year.

Complicating the situation, if a single stalls mid-chart, labels often find themselves in a no-win situation: If the song isn't a hit after 12 weeks, retailers are eager to return albums to the labels to make room for more Twain or Dixie Chicks CDs. But if a single stiffs, programmers say that can reflect negatively upon an artist's next release. As a result, single selection has gotten harder than ever.

"Next year will be really interesting," says Scott Hendricks, president of Virgin Nashville. "Now that records last longer, there's not a need necessarily to have an album as quickly as before. Next year, it looks like Garth isn't going to have a record, Shania won't have a record ready, Faith won't have a record ready. I would imagine Tim McGraw would still be on his current record. When you take out those heavy hitters, it's going to be pretty eye-opening for country music.

"It should be a good year to break new artists. I think that radio needs to see it too. We have got to break new artists to keep this format alive."

The only problem is, radio airplay isn't resulting in album sales. "The Mark Wills project had four huge hit singles and went platinum," says Luke Lewis, president of Mercury Nashville. "Five years ago, if [we] had four singles that big, I would have been disappointed if we didn't sell 2 million to 3 million."

Part of the problem is that the country-music audience is shrinking. While country still maintains a healthy share of the radio market, listenership has dropped by about 30 percent in big cities like Dallas. And if fewer people are hearing the songs on the radio, then fewer people are going to buy the records.

Meanwhile, some executives believe that when radio programmers add songs, they should give more consideration to an act's success. Although there's quite a buzz right now on SHeDAISY, the only new act to go gold this year, 18 reporting stations have yet to add the group's second single.

"In the pop world, this wouldn't happen," says Randy Goodman, president of Lyric Street Records. "Unfortunately, country radio completely discounts sales. I know radio programmers who say sales don't matter, but that's absurd because it's the ultimate passion score. They are banging away records by artists who don't even have a record in the Top 75, and they wonder why people aren't passionate."

Lyric Street has emerged as the success story of 1999. Many thought Goodman was crazy to open up a new label in such an unsettling time. But the Disney-owned imprint celebrated its first gold record on the heels of its second anniversary. Part of the success came from SHeDAISY's debut single, "Little Goodbyes," which hit No. 3, and the rest came from the label's ability to use the other Disney companies to get the word out on its acts.

"There's a lot of people saying the glass is half full and a lot saying the glass is half empty," Goodman says. "It may be half full for some and half empty for others. It depends on what's going on. We're at the point where people are more discriminating with their country music, and you've got to get your record in the Top 15 to enjoy that bounty. I'm convinced that if we make really good music, it gets found."

All of the executives say they're hopeful as they prepare to enter 2000. "Personally, I have no doubts that we will look back on the year 2000 as the first year where country music started its ascension again," Hinton says. "Enough time having elapsed allows country music to seem fresh to those people who have left the format and have been living on the pop side for a while."

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