• Spitzer Probes Radio Payola
  • March 9, 2005
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • The New York Attorney General has turned his investigative sights on the radio industry, probing whether the practice of record labels paying radio stations to play specific songs is still around.

    So far, four radio station operators have confirmed that they have received subpoenas from Eliot Spitzer's office. Clear Channel Communications, the San Antonio-based company that is the nation's largest operator of radio stations, said late last month that it had been subpoenaed and is "cooperating fully with the investigation into the industry's use of independent promoters and associated allegations of 'pay for play.'" Trade publications, such as Billboard Monitor, reported that other radio groups, including Entercom Communications and Infinity Broadcasting, also have received the subpoenas. Cox Radio recently revealed in a regulatory filing that it too was subpoenaed on February 18, 2005, and intends to cooperate with the probe.

    News of Spitzer's interest in the music business surfaced last fall in press reports that the attorney general had sent subpoenas to major record labels. Payola was a huge scandal for radio in the early days of rock/pop radio, leading to legislation banning the practice. But critics say the industries have simply replaced the practice with another, equally objectionable practice of using independent promoters as go-betweens. A 2002 statement from a coalition of trade, labor, and musician groups describes the practice this way:

    Radio station group owners establish exclusive arrangements with "independent promoters," who then guarantee a fixed annual or monthly sum of money to the radio station group or individual station. In exchange for this payment, the radio station group agrees to give the independent promoter first notice of new songs added to its playlists each week. Stations in the group also tend to play mostly records that have been suggested by the independent promoter. As a result of the standardization of this practice, record companies and artists generally must pay the radio stations' independent promoters if they want to be considered for airplay on those stations. The second payolalike practice occurs after the music labels hire an "independent radio promoter" to legitimately promote their records to specific stations for a fee. Reportedly, certain indie promoters use the labels' money to pay the stations for playing songs on the air.

    Clear Channel said in a statement that it cut all ties to independent promoters in April 2003 "to avoid even the appearance of impropriety, and we are confident the investigation will show the company is in full compliance with the law."

    Significance: The industries' use of independent promoters as go-betweens may qualify as payola or it may not. That issue will probably never come to a head, if the pattern of Spitzer's past investigations holds true in this latest probe of the radio business. The radio stations probably will all follow in Clear Channel's footsteps in severing ties with independent promoters in order to avoid having to defend their practices in court against the powerful New York Attorney General.