FCC proposal could end payola probe

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WASHINGTON -- FCC commissioners are mulling a staff proposal that could resolve the agency's investigation into payola allegations between the record labels and major radio broadcasters, according to industry and government sources.

While details of the Enforcement Bureau's proposal were sketchy, sources said that radio station groups would be required to set aside a certain amount of airtime for music produced independently. The radio groups also would agree to a code of conduct and an education program, the sources said. As part of the deal, the radio broadcasters would not admit to any wrongdoing.

"There are two components," one source said. "There's an education component for people in the industry, where it is spelled out that you can do this and not do that, and there is a code of conduct. Then there is the airtime component."

It was unclear how the airtime deal would work and what would qualify as "independently produced" music, but the sources said that some of the commissioners are concerned about the major labels' ability to dominate the airwaves. Democratic commissioner Jonathan Adelstein, an amateur musician, has been particularly vocal on the payola subject.

Although staff recommendations usually are accepted by the commission, there are policy considerations that need to be worked out among the commissioners.

"It's in flux," one knowledgeable source said.

One of the concerns is whether the airtime component has real teeth or is a paper tiger that allows indie music to be aired when no one is listening.

The payola issue came to the forefront in 2004, when New York State Attorney General Eliot Spitzer launched a wide-ranging probe that has resulted in settlements by the major record companies and CBS Radio. Spitzer's investigation led to settlements that ranged from $2 million-$12 million (HR 9/20).

FCC chairman Kevin Martin attempted to make a deal with the radio companies in 2004. When that failed, he requested documents from four of the nation's biggest radio groups -- Clear Channel Communications Inc., CBS Radio Inc., Entercom Communications Corp. and Citadel Broadcasting Corp. (HR 4/21).

Martin also has come under pressure from independent labels who feel that they are being shut out. Martin was flying back from the Consumer Electronics Show in Las Vegas and was unavailable for comment.

The independent labels' trade organization, the American Association of Independent Music, urged Martin to give them some consideration in the probe early last year. In a letter to Martin in February, A2IM argued that the payola practices were shutting out independent labels.

Under federal law and FCC rules, broadcasters, program producers and program suppliers who have accepted or agreed to payments, services or other valuable consideration for airing material must be disclosed. Disclosure provides broadcasters the information they need to let their audiences know whether material was paid for, and by whom.
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