Payola

The Congressional Payola Investigations occurred in 1959, after the United States Senate began investigating the payola scandal. Among those thought to have been involved were DJ Alan Freed and television personality Dick Clark.[17]

The term Congressional Payola Investigations refers to investigations by the House Subcommittee on Legislative Oversight into payola. Payola can refer to monetary rewards or other types of reimbursement and is a tool record labels use to promote certain artists. Other forms of payola include making arrangements to purchase certain amounts of advertising in exchange for staying on a station's playlist - forcing bands to play station-sponsored concerts for little or no money in order to stay in a station's good graces - and paying for stations to hold "meet the band" contests in exchange for air time for one of the label's newer, lesser-known bands.

The first major payola investigation occurred in the early 1960's. DJ Alan Freed, who was uncooperative in committee hearings, was fired as a result.[18] Dick Clark also testified before the committee, but avoided repercussions,[19] partially due to the fact that he had divested his ownership interest in all of his music-industry holdings.

After the initial investigation, radio DJs were stripped of the authority to make programming decisions and payola became a misdemeanor offense. Programming decisions became the responsibility of station program directors. As a result, the process of persuading stations to play certain songs was simplified. Instead of reaching numerous DJs, record labels only had to connect with one station program director.

Labels turned to independent promoters to circumvent allegations of payola. This practice grew more widespread until a 1986 NBC News investigation called "The New Payola" instigated another round of Congressional investigations.

With the creation of Napster and other now illegal music sharing websites, the power of the independent promoters began to decline. Labels once more began dealing with stations directly.

In 2002, investigations by the office of then-New York District Attorney Eliot Spitzer uncovered evidence that executives at Sony BMG music labels had made deals with several large commercial radio chains. In July 2005, the company acknowledged their improper promotional practices and agreed to pay a $10 million fine.[20]

A different form of payola has been used by the record industry through the loophole of paying a third-party or independent record promoters ("indies"; not to be confused with independent record labels), who will then go and "promote" those songs to radio stations. Offering the radio stations "promotion payments," the independents get the songs that their clients, the record companies, want on the playlists of radio stations around the country.

This newer type of payola was an attempt to sidestep FCC regulations.[21][22] Since the independent intermediaries were the ones actually paying the stations, it was thought that their inducements did not fall under the "payola" rules, so a radio station need not report them as paid promotions.

Former New York State Attorney General Eliot Spitzer prosecuted payola-related crimes in his jurisdiction. His office settled out of court with Sony BMG Music Entertainment in July 2005, Warner Music Group in November 2005 and Universal Music Group in May 2006. The three conglomerates agreed to pay $10 million, $5 million, and $12 million respectively to New York State non-profit organizations that will fund music education and appreciation programs. EMI remains under investigation.[23][24]

Concerns about contemporary forms of payola prompted an investigation during which the FCC established firmly that the "loophole" was still a violation of the law. In 2007, four companies (CBS Radio, Citadel, Clear Channel, and Entercom) settled on paying $12.5 million in fines and accepting tougher restrictions than the legal requirements for three years, although no company admitted any wrongdoing.[25] Due to increased legal scrutiny, some larger radio companies (including industry giant Clear Channel) now refuse to have any contact with independent promoters.

Clear Channel Radio, through iHeartRadio, launched a program called On the Verge that required the stations to play a given song at least 150 times in order to give a new artist exposure. Brand managers at the top of the Clear Channel chain, after listening to hundreds of songs and filtering them down to about five or six favorites from various formats, send those selections to program directors across the country. These program directors vote on which ones they think radio listeners will like the most. Songs that benefited with the exposure were Iggy Azalea's "Fancy". Tinashe's "2 On", Anthony Lewis' "Candy Rain", and Jhené Aiko's "The Worst". Tom Poleman, president of national programming platforms for the company, stated that the acts selected are based solely on the quality of their music and not on label pressure.[26][27]

On Spotify, labels can pay for tracks to appear in user play-lists as "Sponsored Songs". It is possible for users to opt out of this in their account settings.[28][29]

In Mexico, South America, and some regions along the U.S. southern border, it is common for "new artists" to suddenly appear, mainly on folk radio stations. Unknown in the music industry and with no previous career nor explanation of where they came from, these music groups and singers will start to appear consistently on radio, television, and public broadcasts with aggressive promotion of their concerts. They disappear as suddenly as they appeared, leaving the music scene or changing their stage name. Such artists are commonly manufactured by producers of dubious origin, who use payola and promote events in order to launder money from drug trafficking, prostitution, or other illegal operations.[30][31]