Record Companies Respond to FCC Commissioner on Payola – What Should Broadcasters Learn from the Responses?

The responses by the major record labels to Commissioner O’Rielly’s inquiry into allegations of payola practices (see our article here) were published last week while we were all distracted with pandemic issues.  While the responses (available here on the Commissioner’s twitter feed) were perhaps not surprising – saying that the record labels do not engage in any on-air pay-for-play practices where the payment is not disclosed – they nevertheless highlight some practices that should be observed at every radio station.  As I have said in many seminars to broadcasters around the country when talking about FCC sponsorship identification requirements, if you get free stuff in exchange for promoting any product or service on the air, disclose that you got that free stuff. As made clear in these responses, when the record companies give free concert tickets or similar merchandise to a radio station for an on-air giveaway to promote a concert or the release of new music by one of their artists, they agree with the station to reveal on the air that the record company provided the ticket or merchandise that is being given away.

The responses also indicate that these record companies do not provide musical artists to play at station events with any agreement – explicit or implicit – that the station will play those artists more frequently because of their appearance.  While that might happen naturally, it also might not (if, for instance, the band is one of many acts participating at some station-sponsored festival).  The record companies state that their contracts with stations for such events make clear that there is no agreement that any artist appearance is tied to additional airplay for that artist.

The responses also reference settlements with the New York State Attorney General’s office of payola allegations that occurred over a decade ago.  A number of radio companies and record labels entered into settlements with the Attorney General’s office and the radio companies also entered into consent decrees with the FCC to resolve issues raised in these investigations.  One of those settlement agreements with the FCC is available here, and sets out very specific compliance conditions including:

  • Prohibiting stations and employees from exchanging airtime for cash or items of value except under certain circumstances;
  • Placing limits on gifts, concert tickets, and other valuable items from record labels to company stations or employees;
  • Appointing compliance officers who will be responsible for monitoring and reporting company performance under the consent decrees; and
  • Providing regular training to programming personnel on payola restrictions.

Reviewing the specifics of these agreements is an important way for stations to ensure that they are not unintentionally running afoul of the payola rules.  These conditions recognize that there is some interaction to be expected between record labels trying to expose their music and radio companies deciding what to play.  But that needs to be done in a way that is limited to avoid the appearance that money or other items of valuable consideration decide what is played on a station – unless the audience is specifically informed that the programming is sponsored.  With these issues back in the news, be sure to observe these limitations.

Courtesy Broadcast Law Blog