Radio companies to pay $12.5M in payola settlement

WASHINGTON — Exasperated listeners weary of hearing the same songs over and over on the radio may have something to cheer about: a pair of innovative deals that could shake up the music playlists of some of the nation's largest radio-station chains.

Four major radio broadcast companies have tentatively agreed to pay the government $12.5 million and provide 8,400 half-hour segments of free airtime for independent record labels and local artists in separate agreements aimed at curbing the persistent practice known as "payola," according to sources.

Payola — generally defined as radio stations accepting cash or other consideration from record companies in exchange for airplay — has been around as long as the radio industry and was made illegal following a series of scandals in the late 1950s.

Two Federal Communications Commission officials, who spoke on condition of anonymity because final language has not been approved by the full commission, said the monetary settlement is part of a consent decree between the FCC and Clear Channel Communications Inc., CBS Radio, Entercom Communications Corp. and Citadel Broadcasting Corp.

The settlement between the government and the four broadcasters was reached at the same time as a separate deal designed to lead to more airtime for smaller record companies and their lesser-known artists as well as local musicians.

The American Association of Independent Music, a group of independent record labels, has received a commitment from the same four broadcasters for the free airtime, the officials said.

In addition to airplay, the broadcasters and the independent labels have also negotiated a set of "rules of engagement" that will guide how record company representatives and radio programmers interact.

The free airtime would be granted to companies not owned or controlled by one of the nation's four dominant music labels — Sony BMG Music Entertainment, Warner Music Group, Universal Music Group and EMI Group.

The practice of payola, or "pay-for-play," has evolved over the years and become more difficult to track.

In recent years, "independent record promoters" have acted as middlemen to deliver payments to radio stations in exchange for airplay. Other forms of inducement include lavish prizes meant for listeners that wind up going to station employees; promises by record companies of concerts by well-known artists in exchange for airplay; and payments for promotional expenses and station equipment.

Under the FCC consent decree, broadcasters would agree to closer scrutiny in their dealings with record companies, including limits on gifts, a promise to keep a database of all items of value supplied by those companies, the employment of independent compliance officers to make sure stations are following the rules and even a new "payola hotline" for employees to report infractions.

Broadcasters admit to no wrongdoing under the three-year settlement, which has not yet been made public.

Under the separate private agreement, the new "rules of engagement" are aimed at requiring equal access to radio music programmers for all record companies as well as transparency in their dealings, said Peter Gordon, who has been leading the negotiations on behalf of the independent music group.

Gordon is president of Thirsty Ear Recordings, an independent record label, and has been in the music business for 31 years.

"It's absolutely the most historic agreement that the independent community has had with radio," he said. "Without a doubt, nothing else comes close."

Commissioner Jonathan Adelstein, himself an amateur musician, has been in the forefront of the payola fight and has been credited with working out the settlements. "I love music and I want radio to sound fresh, dynamic and real. But payola gets in the way of authenticity because money drives the music, not its quality," he told The Associated Press.

Adelstein said the settlement has gotten the industry's attention.

"Taking payola out of the system will lead to more interesting programming," he added.

Pay-for-play scandals have not been a high priority for the FCC. The last time it took action was March of 2000 when Clear Channel-owned stations KHKS-FM in Denton, Texas and WKQI-FM in Detroit, Mich., were assessed fines of $4,000 each.

Most of the recent headlines regarding payola have been generated by former New York Attorney General Eliot Spitzer, now governor, who has criticized the FCC's inaction. His investigation began in 2004 when he issued subpoenas to a number of record companies, an action that was followed by a series of settlements in 2005 and 2006.

The former attorney general made deals with the four major record labels totaling $30.1 million, as well as with two broadcasters, CBS and Entercom, for another $6.25 million. The funds were distributed to a nonprofit foundation which used the cash to pay for music education programs. He also extracted promises that the companies involved would halt their practices, but the companies are under no obligation to honor the agreements outside the state of New York.

While the FCC has no regulatory authority over record companies, it is responsible for investigating complaints against radio stations.

Federal law and FCC rules require broadcasters to inform listeners if a station is being paid to play a song. The FCC can fine its licensees, but any criminal investigation would be undertaken by the Department of Justice.