Payola controversy heats up

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Changes in the broadcast industry have suddenly made payola a hot issue again. For decades payola has been a sleeper, with radio station owners vaguely recalling the scandals involving Alan Freed in the early days of rock n' roll. Now Congress is getting numerous requests to take a closer look.

Payola is the acceptance of money, services or anything of value in return for broadcasting music or other programming without disclosing on the air that the programming has been paid for and by whom. The Communications Act and FCC regulations have prohibited payola for decades on the theory that the public has a right to know who is trying to persuade them.

The current concern about payola involves more than the traditional payoff to a DJ or program director. Consolidation in the radio industry has given large radio group owners the leverage to force record companies to pay radio stations before the stations will play their music. But because direct payments are subject to the prohibition against payola, it is alleged by some that group owners may be using alternative, less direct methods to achieve the same end. For example, one group owner has drawn the wrath of record companies because it also holds a dominant position in the music concert business. Record companies claim the owner pressures them to use the company's concert services for the record companies' artists. If they don't, the artists' songs are not played.

Another allegation is that record companies are relying on middlemen, or independent promoters, to make improper payments. Using the record companies' money, these promoters ostensibly pay for advance copies of stations' music playlists but, in the process, gain access to the personnel who create the playlists and, because of the large sums involved, are able to influence music selections. The Commission's staff has stated informally, however, that such payments by independent promoters are legal so long as there is no quid pro quo for airplay.

Various congressmen are leading efforts to stop these practices. Sen. Russell Feingold (D-WI) is planning to introduce legislation that would reform the radio industry practices that some say have led to higher concert ticket prices and homogenized radio programming that only features artists whose record companies or agents are willing and able to exercise financial clout. Rep. Howard Berman of California has called for a reversal of radio ownership consolidation because it has concentrated power in only a handful of conglomerates.

Industry groups such as the RIAA and AFTRA are urging Congress and the FCC to address this issue.

While nothing may come of these initiatives during this election year, complaints from affected businesses, public policy groups, trade associations and consumers, particularly when they come in increasing numbers, ultimately get the attention of Congressional committees and the FCC. Stations involved in these arrangements or promotions should review their practices with an eye to a future crackdown.

Free time, spectrum fees proposed

Legislation sponsored by Sen. McCain (R-AZ), Sen. Feingold (D-WI), Sen. Toricelli (D-NJ) and Rep. Martin Meehan (D-MA) would require radio and TV stations to provide at least two hours a week of free air time to candidates and for issue-oriented programs in periods immediately prior to elections. At least half of the donated time would have to be in drive time or prime time and none could be during graveyard hours (midnight-6:00 a.m.). Also under the proposed legislation, broadcasters would be billed a one percent spectrum user fee, the proceeds of which would fund the purchase of advertising time by candidates. Candidates would be issued vouchers which could be redeemed for advertising time. The vouchers would be presented by broadcasters to the government for payment.

This plan includes elements of the Toricelli amendment, which proposed free time for candidates, but was defeated during the debate on campaign finance reform last year.

Congressman Fred Upton (R-MI), who chairs the telecom subcommittee in the House, has already announced his opposition to the new McCain-Feingold initiative.

Martin is an attorney with Fletcher, Heald & Hildreth, PLC., Arlington, VA. E-mail


The next renewal cycle begins March 1, 2003, when stations in Washington DC, Maryland, Virginia and West Virginia must begin broadcasting their pre-filing renewal announcements. Renewal applications for stations in those locations will be due June 1, 2003.

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