By Allison Babka
By Daniel Hill
By Drew Ailes
By Brian Heffernan
By Joseph Hess
By Joseph Hess
By Mike Appelstein
By Alison Babka
Ah, payola, sweet payola, 'twere like you never left. Actually, it hasn't -- much to the chagrin of U.S. Senator Russ Feingold (D-Wisconsin).
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.
"The radio station says, 'Gee, you gave your concert to our sister company's competitor, so we don't feel much desire to promote that artist's music anymore,'" says Cary Sherman, president of the Recording Industry Association of America, the chief lobbying arm of the major labels.
Feingold testified before the commerce committee that since 1996, ticket prices at concerts have outpaced inflation by 50 percent. He blames Clear Channel. "My number-one concern is the ability of a company to buy up all the major entertainment elements in a community and cross-leverage that ownership, as I'm afraid Clear Channel has done too many times," Feingold explained in a recent interview.
Is it any wonder Duncan's American Radio reported in September that radio listening was at a 27-year low? "Whether it's consolidation, independent promotion or the combination of the two, it's affecting musical choice," says Silverman. "Everything sounds the same."
The radio lobby likes to argue that consolidation has resulted in greater format diversity, but what does that matter when they all play the same twenty songs? "When you only have two or three major players, it tends to be like the Bloods and the Crips: They divide up the town and don't interfere with each other's turf," says Robert Unmacht, a Nashville-based radio consultant.
More alarmingly, radio's local touch, which once made it the hottest of all electronic media, has faded. Some things aren't missed until they're gone. FCC Commissioner Michael Copps, a Democrat, tells of recent embarrassments in North Dakota and North Carolina in which local disasters had residents calling their local radio stations for more information, only to find nothing was there to answer except the automated DJ.
Yet even the live disc jockeys lack the personality of a bygone era, according to Scottsdale, Arizona-based radio consultant and onetime Inside Radio editor Jerry Del Calliano. "Out here in Phoenix and Scottsdale, the jocks come on the air and sound like we're almost waking them up by listening to them.
"They can't package the product in a compelling way, and the product that they're packaging sucks as badly as what they do on the air," he says later.
Even Major Healy couldn't get this genie back in the bottle, something Feingold acknowledges with a qualifier: "I think we can prevent the hemorrhaging," he says.
That is, if his bill can even pass. "Let's face it, we have a Congress and a president that don't believe in regulating the private marketplace. On the other hand, it's hard for anybody to support the idea that the public airwaves are not serving the public interest," says Sherman.
And despite the sketchy results of the 1996 changes, Powell is considering stroking TV and newspapers with a similar deregulation stance. Powell has gone on record as saying he believes ownership restrictions are increasingly irrelevant in a world rife with Internet, cable and wireless-communication options.
Imagine that Gannett and Clear Channel owned every single media outlet in town. "Suppose, for the sake of argument, that we make a mistake ... the American people need to know the stakes of the game and that they own [the airwaves] to begin with," says Copps. "It's theirs."