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The Problem with Pay-for-Play

by: Michele Ellison

July 26, 2010

Yesterday, the Enforcement Bureau entered into a settlement with Univision Radio, Inc. to resolve serious allegations that station employees secretly accepted thousands of dollars in bribes to play the music of artists from the Univision Music Group (UMG) record label.  Federal law allows radio stations to accept payments for material they broadcast, but does not permit them to conceal that fact from the public.  The purpose of this law is to protect consumers from deceit – or, as the FCC has long explained, to ensure that listeners understand who is trying to persuade them.

In a companion action, another Univision company pled guilty to criminal charges filed by the U.S. Department of Justice (DOJ).  The Univision company admitted that UMG executives, employees and agents made illegal cash payments to radio station program managers from 2002 to 2006, in order to increase airplay of UMG recordings.  The coordinated actions of the federal government attacked both ends of the enterprise – DOJ’s action primarily addressed the record label that paid the bribes, while the FCC focused on the Univision radio stations that accepted them.

All told, Univision will pay $1 million to resolve the cases.  But the FCC settlement is about more than money.  Univision must also change its business practices, hire a Compliance Officer, and take other concrete steps to avoid future violations, so the music that secretly pays the most, no longer plays the most.

For the uninitiated, this type of “pay-for-play” scheme, called “payola,” is said to be as old as the music industry.  The word “payola” itself – a contraction of “pay” and “Victrola” (those old vintage record players) – underscores how long the practice has been around.  Indeed, Congress conducted hearings to investigate “pay for play” in broadcasting more than a half century ago, at a time when local radio had just begun playing rock ‘n’ roll, and when radio was about the only way for recording artists to reach a broad audience.

The FCC and DOJ aggressively investigated these payola allegations.  But in this age of iTunes, YouTube, and satellite radio, some might wonder why.

Well, first of all, it's the law.  Broadcasters must tell their listeners if they receive cash or gifts in exchange for playing certain music or airing other content.   At its core, this is about fairness and plain dealing.  And even with so many alternatives for artist exposure, recording artists tell us that having their music play on the radio is still critically important.  The fact that payola still exists underscores that some still believe it’s a beneficial way for artists to gain this exposure.

The bottom line, though, is that broadcasting fundamentally differs from other businesses.  In exchange for using the public’s airwaves, broadcasters must program their stations to serve their communities of license – in other words, to serve consumers of broadcast media in their local area.  Generally, how broadcasters fulfill this duty is up to them, but whether you're a listener, an artist, a broadcaster, or a record label, everyone ought to agree that deceiving the public is not in the public's best interest.

Since the early days of radio, many broadcasters have taken steps to ensure that their listeners are properly informed.  Our coordinated enforcement actions make clear that we will not hesitate to act when they fail to do so. While this settlement was about protecting the public trust in our Nation's airwaves, we will continue to bring the same vigor to protecting consumers across all communications services.

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