Radio companies to pay $12.5 million payola fine

By Jim Puzzanghera
Times Staff Writer

12:11 PM PST, March 5, 2007

WASHINGTON — Four of the nation's largest broadcast radio companies have agreed to pay a combined $12.5 million to settle a federal investigation into "pay-for-play" practices and will provide thousands of hours of free airtime to local musicians and independent record labels, sources familiar with the agreement said today.

Details of the settlement are being worked out and the Federal Communications Commission still must approve it. Under terms of the agreement, Clear Channel Communications Inc., CBS Radio Inc., Entercom Communications Corp. and Citadel Broadcasting Corp. would pay one of the largest fines ever levied by the FCC. The companies allegedly received money, airline tickets, clothing and other gifts from major record companies to play certain songs.

The under-the-table payments, known as payola, have been illegal since a series of pay-for-play scandals in the early days of rock 'n' roll in the 1950s. Any payment in exchange for airtime must be disclosed by broadcasters.

The $12.5-million fine to be paid by the four companies is in line with settlements two of the companies reached with former New York Attorney General Elliott Spitzer. CBS Radio agreed to pay $2 million in October and Entercom agreed to a $4.45 million fine two months later.

But the proposed FCC fine pales in comparison to big settlements Spitzer got from major record companies. Universal Music Group, for example, agreed last year to pay more than $12 million to settle payola allegations. The FCC's jurisdiction, however, is limited to broadcast radio stations.

FCC Commissioner Jonathan S. Adelstein, an amateur musician who helped broker the deal, said the fines and airplay agreements were significant.

"I think it's a real breakthrough in the battle to wipe payola off the airwaves," he said. "If you take payola out of radio then music gets heard on the basis of merit, not on the basis of who's got wads of cash backing the artist. That's likely to make radio fresher and restore its vitality."

In a separate agreement, the radio companies have agreed to set aside 8,400 half-hour segments of free airtime over the next three years for local and independent artists. The segments would have to air between 6 a.m. and midnight.

"It's a watershed moment in our industry," said Peter Gordon, president of Thirsty Ear Recordings, an independent record label based in Connecticut. He helped negotiate the airtime provisions as a board member of the American Association of Independent Music.

"The independent sector has a chance to have a voice once again on commercial radio," Gordon said. "I think you're looking at the airwaves being refreshed."