Broadcasters in Payola Deal

WASHINGTON Clear Channel, CBS Radio, Entercom and Citadel Broadcasting have agreed to a consent decree that includes a $12.5 million payment to settle payola allegations raised by the Federal Communications Commission, sources said.

Independent recording artists will get a clearer shot at the airwaves under the deal cut by the big radio station groups and indie labels as part of the federal payola investigation.

While it is not part of the consent decree, a separate voluntary side deal between the station groups and the American Association of Independent Music (A2IM) would set aside 8,400 half-hour blocks of time for independent music.

Peter Gordon, founder of Thirsty Ear Recordings and A2IM’s chief negotiator, said in an interview that the “agreement in principle” is a way to get independent music on the air that also avoids undue government interference.

“It’s a private relationship between the radio groups and the independent music sector,” he said. “It’s a chance for all of us to embrace each other’s cultures, and it looks like the best way to get good stuff for people to listen to.”

The free airtime would be granted to companies not owned or controlled by Sony BMG Music Entertainment, Warner Music Group, Universal Music Group and EMI Group; do not have a market share larger than 5 percent; and are represented as independent through Nielsen SoundScan.

Along with airtime, 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.

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.

Under federal law and FCC rules, the identity of 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.

Recent payola scandals have been known as “pay for play,” where 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 undergo closer scrutiny in their dealings with record companies, including limits on gifts. They must promise to keep a database of all items of value supplied by those companies. The decree calls for the employment of independent compliance officers to make sure stations are following the rules and sets up a new “payola hotline” for employees to report infractions.

FCC officials said the commission had considered making the independent music language part of the consent decree but were afraid they would be accused of overstepping their legal authority.