Making Sense of Payola

By Timothy Karr, Free Press. Posted October 21, 2005.

Ever get the sinking feeling that the same terrible Celine Dion song is on the radio every time you turn it on? It's not your imagination. Local radio stations everywhere have been swallowed up by a handful of giant corporations, playlists have shrunk, and local and independent acts have been drowned out, as Big Radio soaks listeners in a mind-numbing mix of bland commercial acts.

The rapid concentration of radio ownership has also ushered in a new age of "payola." Major recording labels now shower radio station owners with money and prizes to plug and play their most bankable stars, securing spins of Dion, Ricky Martin, J. Lo, Jessica Simpson and even major label indie kids Franz Ferdinand at the expense of struggling local acts.

There's the catch: Payola is against the law. The New York Attorney General's Office, Federal Communications Commission and members of Congress are investigating radio industry corruption. There's no better time than now for music lovers to protect the radio airwaves from insatiable corporate greed and end payola once and for all.

1. What is radio payola?

For decades, radio payola has been an unpleasant fact of American music. Radio stations hold valuable broadcast licenses and are the main drivers of sales for the record industry. More than 75 percent of music buyers say their CD purchases are influenced by songs heard on the radio. All a record executive has to do is convince popular DJs to put their artists in heavy rotation. Money has long proved the elixir of persuasion. In 1960, disc jockey Alan Freed was indicted under commercial bribery laws for accepting $2,500 to play certain songs; he claimed the money was a "token of gratitude" that did not affect airplay. But the FCC disagreed, passing regulations that ban payola in broadcasting. The playing of music or other programming in exchange for payments is now illegal, punishable by as much as $10,000 in fines and a year in prison. To date, no one has served a day in jail on payola charges.

2. Is payola still a problem?

In many ways, it's worse. Shadowy independent promoters are hired by the recording industry to launder hundreds of millions in cash and prizes each year, lining the pockets of big radio broadcasters who agree to add label "hits" to playlists nationwide. Last summer, Clear Channel and Infinity Broadcasting -- America 's two largest radio owners, controlling 42 percent of listeners -- were implicated with other major radio owners in a multi-million dollar payola scheme. Investigators called this single payola case the "tip of the iceberg."

3. How does payola work?

Payola involves the flow of money and other perks from music labels to radio stations, and, through resulting record sales, back to the labels themselves. It's a closed loop that shuns local talent, artistic merit and listener preferences. Once involving envelopes stuffed with cash and even drugs, payola in 2005 has taken on new forms, including back stage passes to Michael Jackson concerts, first-class tickets to Miami, Las Vegas hotel rooms and even Adidas sneakers. (Use Free Press' interactive map to find stations near you suspected of accepting payola). By law, radio disc jockeys must fully disclose to their listeners whether airplay of a chosen song was paid for by promoters. They never do.

4. Do the big media companies really control what gets played on commercial radio?

The 1996 Telecommunications Act eliminated national limits on station ownership. Prior to 1996, no one radio owner held more than 65 stations; now, radio colossus Clear Channel boasts some 1,200 stations. More than 75 percent of radio market share nationwide is controlled by companies owning more than 40 radio stations. In a consolidated radio marketplace, recording labels have fewer palms to grease to get their acts on the air, even if listeners don't want to hear them.

5. Does radio play really affect sales?

These conglomerates use redundant playlists to air a limited choice of artists, even in the same markets. Commercial airwaves are flooded by only those artists that are acceptable to the corporations that profit from their sales. And more than 80 percent of the $12 billion in annual music sales are controlled by the four largest labels - Sony BMG, EMI, Universal and Warner Music Group. When consolidated radio and recording labels control the music industry, musical diversity is threatened.

6. Doesn't payola help musicians?

On average, performers on major labels see only $1 out of the $16 retail price paid by consumers for a CD. The bulk of sales revenue returns to the record labels, and through them to the promoters and big radio. This closed loop feeds the insatiable appetites of greedy recording labels and radio broadcasters. Big label artists see little of these profits. Independent musicians are even worse off. The corporate control of promotion, sales and airplay almost entirely prevents local artists from competing in the mainstream.

Timothy Karr is the author of MediaCitizen, a weblog about the future of America's media. He is the campaign director of Free Press.

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