4 radio chains to pay $12.5 million in payola case

March 06, 2007|By Jim Puzzanghera | Jim Puzzanghera,LOS ANGELES TIMES

WASHINGTON -- Four of the nation's largest broadcast radio companies have agreed to pay a combined $12.5 million to settle a federal investigation into "pay-for-play" practices.

The stations also agreed to provide thousands of hours of free airtime to local musicians and independent record labels, sources familiar with the agreement said yesterday.

Under terms of the agreement, Clear Channel Communications Inc., the nation's largest radio station owner; CBS Radio Inc., Entercom Communications Corp. and Citadel Broadcasting Corp. would pay one of the largest fines ever levied by the Federal Communications Commission. The companies allegedly received money, airline tickets, clothing and other gifts from major record companies to play certain songs.

Details of the settlement are still being worked out, and the FCC still must approve it.

The under-the-table payments, known as payola, have been illegal since a series of pay-for-play scandals in the early days of rock 'n' roll in the 1950s. Any payment in exchange for air time must be disclosed by broadcasters.

The $12.5 million fine to be paid by the four companies is in line with settlements two of the companies reached with New York Gov. Eliot Spitzer, who was then state attorney general. CBS Radio agreed to pay $2 million in October, and Entercom agreed to a $4.45 million fine two months later.

But the proposed FCC fine pales in comparison with settlements that Spitzer got from major record companies. Universal Music Group, for example, agreed last year to pay more than $12 million to settle payola allegations. The FCC's jurisdiction is limited to broadcast stations.

FCC Commissioner Jonathan S. Adelstein, an amateur musician who helped broker the deal, said the fines and airplay agreements were significant.

"I think it's a real breakthrough in the battle to wipe payola off the airwaves," he said. "If you take payola out of radio, then music gets heard on the basis of merit, not on the basis of who's got wads of cash backing the artist. That's likely to make radio fresher and restore its vitality."

In a separate agreement, the radio companies have agreed to set aside 8,400 half-hour segments of free air time over the next three years for local and independent artists.

"It's a watershed moment in our industry," said Peter Gordon, president of Thirsty Ear Recordings, an independent record label in Connecticut.

Gordon helped to negotiate the air-time provisions as a board member of the American Association of Independent Music.

"The independent sector has a chance to have a voice once again on commercial radio," he said.

Jim Puzzanghera writes for the Los Angeles Times.

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