By Hans Morgenstern
By Joseph Hess
By Peter Gilstrap
By Julia Burch
By Jeremy Essig
By Nathan Smith
By Julie Seabaugh
By Julie Seabaugh
Since the 1950s, when Alan Freed and other DJs accepted money to make songs hits, payola has taken on a new guise in the wake of landmark radio deregulation. It's also attracted legislative scrutiny in response to the ire of the slumping major labels.
Feingold recently introduced a bill aimed at squeezing the titanic radio conglomerates accused of wielding their monopoly power. The bill won't reverse the consolidation that's gripped the radio industry -- the damage there, as Neil Young would say, is done -- but it might at least limit its advance. It might not improve what experts believe has become a limp medium, but it does seek to stop radio from using its economies of scale to solicit ever-greater payments
The bill directs the Federal Communications Commission to revoke the license of any radio station that uses its cross-ownership of promotional services or venues to discriminate against musicians, concert promoters or other radio stations; outlaws any further revisions of ownership limits of radio stations in local markets; and closes loopholes that potentially allow holding companies to provide excessive programming or advertising for stations they don't own. The bill also closes a loophole allowing radio stations to receive money directly or indirectly for airplay without acknowledging so with an on-air identification statement.
"We need to strengthen the law, to push this system back and, if we can't completely eliminate it, at least limit the corrupting influence these payola-type payments have," says Feingold, one of only five senators to vote against the Telecommunications Act of 1996, the behemoth legislation that, among many other things, relaxed limits on local radio ownership. "I think a strengthening of the law would help artists to get their music played based on its merits."
The bill received a hearing recently in front of the Senate Commerce Committee, chaired by Arizona Republican John McCain -- he and Feingold, after all, were the cowboys of campaign-finance reform. For now, however, McCain continues to defer to the FCC and its conservative chairman, Michael Powell, son of Colin.
Speaking at McCain's hearing, Lowry Mays, chairman and chief executive of perceived industry ogre Clear Channel Communications, denied that his company is a brutish monopolizer. "American radio is stronger than ever, is meeting listeners' needs and is in touch with the diverse demands of local communities," Mays said.
Yet sources throughout the music industry stand at a polar opposite, viewing Mays' company as a public enemy. Clear Channel, a San Antonio company, did not respond to numerous requests for further comment.
Since 1996, Clear Channel has grown at a pace that would make Starbucks envious. The company now owns more than 1,200 stations, nearly five times as many as its nearest competitor. It also owns SFX, the concert-promotion juggernaut, giving it exclusive booking rights to more than 135 venues nationally. Using their new clout, Clear Channel and smaller radio groups -- Emmis Communications, Cumulus Media and others have been moderately acquisitive themselves -- signed guaranteed-exclusive contracts with the independent promoters who pitch local radio stations on what they hope will be breakout hits, limiting the access of their program directors to those "indies." A typical deal, as reported in Milwaukee's Business Journal, cost promoter Jeff McCluskey an estimated $1 million for exclusive rights to pitch songs to radio programmers at Cumulus' 248 stations.
These indies became de facto agents of the radio stations as a result, acting as gatekeepers for the radio groups' playlists and working to recover their steep costs. If a label wants a song added to rotation, it must go through the middleman. Previously labels used indies as an extension of their own promotion department, paying them on the basis of their success in getting songs on the radio and cutting loose those promoters who failed to get results. Doesn't really work when one side has the middleman by the short-and-curlies.
With no viable alternative, labels found themselves paying as much as $3,000 just for the right to have the indies approach the station brass. Though promoters and the radio groups have sworn repeatedly there's no quid pro quo going on, reports on Salon.com and in the Los Angeles Times and other publications suggest otherwise.
"It's a very noncompetitive situation. Basically, every record that gets played [the promoter] collects on, whether they did any work or not," says Tom Silverman, founder of Tommy Boy Records. "[Once] there was a market for promoters because there were multiple promoters for every station ... some guys were hot and some guys were not, and we'd have to change every so often because a guy would cool off."
Clear Channel now dwarfs competitors; the company and Viacom control more than 40 percent of the nation's industry revenues. In St. Louis, Clear Channel owns six stations; Viacom's Infinity Broadcasting owns three, including KMOX (1120 AM).
This formation, however, goes well beyond the airwaves, pushing into the music business as a whole. Last year, Denver concert-promotion company Nobody in Particular Presents sued Clear Channel for leveraging its airplay to steer concert promotion deals and free, exclusive concerts to member stations. Reports of this kind of behavior are legion.