Payola Probe Expanding

Congress and the FCC step up investigations

November 18, 2004 12:00 AM ET
New York State Attorney General Eliot Spitzer is making headlines for his crusade against payola in the music business, but radio stations and record labels are being scrutinized by a higher authority as well: the federal government.

The Federal Communications Commission closed the first phase of its investigation into radio consolidation and payola -- the practice of record labels paying radio stations for airplay -- on November 1st. Several congressional leaders are also looking into the issue.

"We're all waiting to see which agencies and committees will carry the torch," says Andrew Jay Schwartzman, president of Media Access Project, a public-interest law firm. "I can tell you that these issues aren't going away."

Direct pay-for-play is rare today, but most record labels hire independent promoters who in turn pay radio stations for access to their programmers. Some label executives estimate it costs upwards of $150,000 to get a song on commercial radio. Last year, musicians including Don Henley testified before the Senate Commerce Committee about the issue. "I know there's payola, because I get billed for it," he stated.

A year ago, Sen. John McCain, chairman of the Commerce Committee, wrote a letter to FCC chief Michael Powell pushing him to examine the issue, and in July, the agency opened a period of public comment on it. "Broadcasters have said that [FCC] authority is only to regulate per-song payments," said an FCC source, "but we think any kind of direct or indirect payment going toward getting music on the air is a problem. We may want Congress to provide specific guidance on the matter."

New York Democratic Rep. Anthony Weiner tells Rolling Stone that, during the next legislative session, he, too, will call for hearings in the House on payola.

Radio-station representatives declined to comment. And while some label executives, speaking on condition of anonymity, fear that the investigations will be damaging, others say they will cooperate in the hopes of ending the payola system. The Recording Industry Association of America filed a brief with the FCC on November 1st, requesting that the commission take a strict stance against the practice.

Many believe Spitzer is best positioned to clean up the music business, given his history of reforming major industries, such as insurance and investment banking. "Spitzer's people feel like they've figured out payola law and will be able to develop prosecutions," says a source close to the investigation.

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