FCC To Review Payola

New York Atty. Gen. Eliot Spitzer’s probe of “pay-for-play” practices in the recording industry not only tapped Sony BMG for a $10 million settlement payout, but now has caught the attention of the Feds.

Federal Communications Commission Chairman Kevin Martin announced August 8th that his agency will review the Sony/Spitzer settlement for disclosures of payola rule violations by radio station owners – which could result in anything from fines to broadcast license revocations for offenders.

The FCC “will not tolerate noncompliance,” Martin said in a statement. “While payola may not be a widespread practice in the broadcasting industry, to the extent it is going on, it must stop.”

The agency, which regulates the public airwaves, could fine violators as much as $32,500 per incident. Or, it could broaden a probe of conduct at a few stations into an industry-wide investigation and some stations could find their broadcast licenses in jeopardy.

A 1960 federal law and related state laws prohibit record companies from offering undisclosed financial incentives in exchange for airplay.

FCC Commissioner Jonathan Adelstein, who had called for an agency investigation, applauded the move.

“I believe this payola scandal may represent the most widespread and flagrant violation of any FCC rules in the history of American broadcasting,” he said.

“Mr. Spitzer’s office has collected a mountain of evidence on the potentially illegal promotion practices of not only Sony BMG, but also other major record companies, independent promoters and several of the largest radio station groups.”

Evidentiary documents released in Spitzer’s investigation of Sony BMG revealed instances where gifts such as computers, plasma screen TVs and airplane tickets were given by the record company to radio execs in exchange for increased play of label artists.

Shortly after Spitzer announced the investigation last year, several radio companies including Clear Channel and Infinity announced they were cutting ties with independent record promoters, which were largely viewed as the worst “pay-for-play” offenders.

However, Spitzer reported that the action only resulted in those companies dealing directly with Sony BMG, leading to more blatant violations of payola rules, according to The Wall Street Journal.

Clear Channel Communications immediately issued a statement saying an internal investigation was already under way and discipline would be swift for any improper behavior by radio station execs. The company added it didn’t expect to be subpoenaed.

Other radio groups named in Spitzer’s report include Entercom Communications, Archway Broadcasting Group and Albany Broadcasting Group.