AIRPLAY AND PAYOLA
In the world of radio promotion, some stations, known in the business as “parallel one” stations, have more influence than others on Billboard and other chart publications. (Although satellite radio channels do not currently have parallel one status, it is only a matter of time before SiriusXM, or even Music Choice, makes a profound impact on consumer awareness of new artists and new releases.) To have a record added to a playlist on, say, forty parallel one stations in the first week of a record’s release will most likely assure it a spot on the hot 100. Therefore, record labels will usually see to it that those stations receive copies of the single, or, if available, copies of the album way in advance of the release date, usually at least four months. Radio stations know that receiving a record product on its release date, or even one to three weeks in advance, indicates a lower priority at the label. It suggests that less money will be committed, fewer marketing tools will be used, and there will be less follow-up from the record company divisions (field sales personnel, publicists, and others), fewer in-stores, less co-op advertising, fewer radio station personal appearances, etc.—all those things that will eventually confirm to the radio station’s listeners the correctness and foresight of a particular radio station programmer or DJ for having chosen that particular record as “hit bound.” The importance of a company manifesting its commitment to an artist and recording cannot be overemphasized.
A Brief History of Payola
A combination of FCC rules and federal statutes govern payola, which is defined as the unreported payment to employees of broadcast stations, program producers, or program suppliers of any money, service, or valuable consideration for the purpose of achieving airplay. In short, payola is a bribe. An FCC rule referencing the applicable statute and FCC policies on payola (47C.F.R. Section 73.4180) states simply that the Federal Communications Act requires persons who have paid, accepted, or agreed to pay or accept any consideration for the broadcast of any material to report that fact to the station before the material is broadcast (47USC Section 508). If the material which is broadcast is paid for, the act further requires the station to announce that fact on the air and to identify the sponsor (47USC Section 317). The 1988 FCC Public Notice referenced in 47C.F.R. Section 73.1480 explains the FCC’s payola policy. Failure to adhere to these reporting requirements can subject the violator to a fine of up to $10,000 or imprisonment in a federal penitentiary of up to one year, or both.
On February 25, 1988, four persons were indicted in US District Court in Los Angeles, California, for payola violations. One of those indicted was charged with having made “undisclosed payments from 1980 to 1985 in the form of cash and cocaine” to station personnel in order to secure airplay for certain records. These four persons were later convicted.
What does this have to do with record promotion? Let’s just say that in the absence of regulations like the ones cited above, there would be little chance for an artist to succeed on his or her own merits. Money talks just as loudly in the record industry as in politics. Just as an incumbent politician with millions of dollars in his coffers usually buries a newcomer, those in the record industry with easy access to the media can leave their less fortunate competitors in the proverbial dust. Remember, in the United States, and increasingly throughout the world, with the rare exception of a YouTube video clip which has gone viral, if you don’t get played on the radio, you won’t succeed. Period. Or at least succeed in a big way. Those who claim that touring has replaced radio-supported record sales are simply serving up a myth.
I like to believe that if a talented person stays in the game long enough, the person’s creativity will win out despite such obstacles as better funded and/or more established competitors (for the airwaves), stations’ preference for tried-and-true musical styles, and xenophobic arbiters of taste. Unfortunately, this idealistic view runs afoul of the incredible power of the broadcasting industry. Listener expectations that songs are always selected for airplay on the basis of their merit is historically naive. I will not restate the history of payola except to say that there have been times in our history during which illicit means to attain radio play (that is, bribes) ran rampant throughout the radio industry. These included cash payments to disk jockeys and radio programmers as well as other kinds of favors, such as expensive gifts (television sets, cars, etc.), sexual favors, and, of course, drugs.
For good reason, and throughout the 1990s and early 2000s, the federal government thought that it had done a fairly good job at terminating this practice. But the record industry could not quite give up the advantages gained during the heyday of payola. So the leopard merely changed its spots one day. The road between the record company and the radio station was irrevocably placed on permanent detour. Let me explain.
Chart Manipulation: The New Payola As EDM (electronic dance music) takes over hip-hop and rap as the most popular youth-driven genre (even Jay Z has signed several DJs to his label), payola has raised its head again—this time by controlling charts. If the important charts display your record among the top 100 (or better), you can relax. How to get there in the modern age? Read on.
Given the rise of the “playlist,” curated by and for individuals signed up to streaming services, charts have become even more significant than merely written lists of the most performed/sold recordings. As this book goes to press, Beatport (an SFX subsidiary) is in the middle of the dispute as to whether charts can be manipulated. While that site is generally regarded as quite diligent in pulling from its playlists tracks that they suspect have been illegally charted, some artists/producers have claimed otherwise. Laidback Luke, having had one of his recordings removed from a Beatport playlist, was appalled. Having achieved the irreplaceable—and I think that I can say essential—goal of getting his record on the playlists of Spotify, Deezer, and Apple Music, Beatport decided that the activity attributable to the track was suspect. Arriving in the “streaming space” is the holy grail. To depart from it is to be moving in the wrong direction.
How does a track get added to a playlist on, say, Spotify? First, fans will add it to their personal playlists; then their friends will adopt it and add it to theirs (not only because it has gotten their attention and they like it, but also because in the world of social media, if you like, it, then it must be worthy of being liked by your peers (and online friends); before you know it, the song has gone viral and become unstoppable. Naturally, the payday is so great that adding a song to a major sites’ playlist is susceptible of bribery, and once again, we’re back to the tried and true, if not honest, days (years) of payola. Pay for play is a natural outgrowth of the scenario where one person, or a few persons, “curate” a play list. It has not yet been proven that payola exists in the curation of playlists, but when thousands of dollars, if not millions, and of course entire careers, are at stake, the record that gets the play, gets the influx of money for additional promotion. The money follows the money. Record companies do not throw money at records that are not making any noise; they throw it at records that are. Allegedly, adding a song to a watched playlist can cost upward of only a mere $2,000 to $10,000 for the privilege. This is a drop in the water when honest, straightforward, promotion can cost upward of $250,000. As in the past, new acts tend to fall behind the dividing line between legitimate and illegitimate ways to reach the public on anything that resembles a level playing field.
Worth noting, however, is that this kind of chart manipulation is not (or not yet) a crime. There may be other laws which might be asserted to protect consumers and creators such as the laws of unfair competition, anti-trust and the like. Manipulating charts and playlists of streaming services has nothing to do with broadcasting over FCC-licensed airwaves. The Payola Law (47US Code Section 508—the Federal Communications Act) simply does not apply.
The Independent Record Promoter
Record companies today rarely expend the lion’s share of their promotion money on their promotion division staff’s own efforts to prom
ote radio play. For most of the history of the music business as we know it, one of the record companies’ vaunted talents was to promote their products. They sold themselves on these strengths. Even today, they have sophisticated promotion departments. What is different?
Over a decade ago, in the midst of several federal investigations of the presence of payola in the record industry, the major record companies had a brilliant idea. Why should the suited executives subject themselves to these tawdry, tedious, and expensive investigations, all of which were centered around the foot soldiers of the industry? Why indeed when the risks were so great? For a CBS (which owned the CBS Radio and Television Network as well as several other stations) or an RCA (which owned the NBC Radio and Television Network, as well as several other stations), violations of federal payola regulations by their record divisions threatened the most lucrative assets the corporate giants owned, their broadcasting licenses. Simply put, broadcast licenses would not be renewed for felons.
What to do? Simple. Kill the messenger.
The record companies, as a group, fired most of their promotion department personnel. Now that the villains were no longer employed by the record companies, the broadcasters and record companies could breathe more easily. Only there was one problem. The record companies could not promote their records without promotion people. You might say that this was like cutting off your head to spite your body, but the record companies had a solution.
Enter the independent promoter. Who was the independent promoter? In many cases, the same person who had previously been employed by the record company. Now, instead of a W-2, the company filed a 1099 with the IRS. The independent promoter was an independent contractor and was not under the “supervision, guidance, or control” of the record company, let alone the parent company. The parent was safe. The record company was safe. Voilà! Saved from the Feds. If the “independent” promotion people violated the law, there was no clear line of authority and therefore no clear culpability on the part of the record companies that could implicate their parent companies and, among other things, jeopardize their broadcast licenses.
The internal cost of a promotion department decreased enormously (the companies retained a head of promotion and a skeletal staff), and there were lots of promotion dollars available to spread among the independent promoters. The promotion people thus hired, of course, did not let a good thing go unexploited. They began to charge more and more money to the record companies for their services. But the record companies were not so dumb. They insisted that the fees they paid be tied to the success of the promotion people: How about $4,000 dollars if radio station WXXX were to “go on” the record? Or $10,000 if radio station KZZZ were to add it to their playlist? Etc. This was getting expensive. But for whom?
Paying an Independent Promoter
The costs of external promotion were running far higher than the costs of the now-disbanded internal staffs. But the record companies had another brilliant idea. Why pay for these “extra” services to promote the artist? Why not let the artist pay for them? After all, the philosophy in the record industry had always been that the artist should pay for recording costs (out of royalties, so ultimately out of his or her pocket). Why shouldn’t the outside services of people engaged to help promote the records be considered recording costs and additional advances?
Certainly a record company’s investment is, as we have seen, considerable: the A&R department that finds the artist in the first place, the business affairs and legal departments that sign the artist, the enormous investment of the actual recording costs, the art department, the manufacturing and distribution facilities, the marketing department, the publicity department, and let’s not forget the dozens of executives who run the company, or the rent that must be paid for the company’s marble towers. Welcoming the reduction in overhead resulting from the downsizing of their promotion departments, the record companies were reluctant to suffer the increase of costs when a lucrative alternative was available to them: simply make it a contractual obligation for the artist to pay for independent promotion of his or her records. If the video clip, which was intrinsically promotional in nature, was now a cost to be borne out of royalties by the artist, why not the dollars spent on independent promotion, an absolutely essential expenditure? What more useful cost than one focused solely on the most proven way of establishing the artist’s success: getting airplay for the record!
And so developed the practice of charging the artist with the cost of independent promotion. It is ironic that the artist and manager must fight with the record company in order to convince it to expend monies on independent promotion only to be obliged to pay for it themselves. Even the manager loses. If the money is charged against the artist’s royalties, customarily the manager will not commission the earned royalties used to recoup the costs of independent promotion—thereby forfeiting the manager’s commission on every recoupable independent promotion dollar spent. Some companies hand over the promotion money to the managers for disbursement. In such cases, assuming the managers are honest and do not skim anything off the top, they get to touch, but not spend, the money that, in part, reflects what would have been their own earned commissions if the promotion efforts had been successful. Ironic.
In recent years, the record companies have settled into a kind of standoff with the artists whereby they seek to be repaid (out of royalties) only one-half of the monies expended on independent promotion. This goes a long way—well, half way—toward ameliorating the damage to the artist’s bank account. Two facts remain, however: one is that these are costs that the record companies traditionally bore themselves and now have found a way to charge back to the artist; the second is that the amount spent on independent promotion—and the timing of such expenditures—is totally within the control of the record company. Thus, if the artist’s account is otherwise in the black (or if the cost of independent promotion can be recouped against other earnings such as mechanical royalty earnings), the record company can actually use the artist’s own money, earned royalties otherwise payable at the end of an accounting period, for the purpose of further promoting the artist’s records, avoiding all risk that would be associated with advancing its own funds for such a purpose. Hmmm.
Icons and Iconoclasts
Many books have been written about the excesses of independent promotion people and their actual or alleged associations with organized crime, drug dealers, and others (for example, Hit Men; Off the Charts; Stiffed—The True Story of MCA, the Music Business, and the Mafia). These are informative, occasionally amusing, and frequently disturbing. Feel free to read them. The point I want to emphasize is that whatever incarnation of payola exists today is a direct descendent of institutions originally established because of record companies’ greed. I say “greed” because when the companies recognized the inherent willingness of a radio station programmer or DJ to compromise their ethical responsibilities, they simply reestablished the promotion system. But this time they did so in a manner that had the appearance of being more at arms’ length than had previously been the case, when the promotion staff was employed by and under the supervision and control of the record companies themselves.
One day, in the 1980s, Warner Bros. Records’ legendary chairman Mo Ostin unilaterally terminated the use of independent promotion people because of what he perceived to be abuses that were inherent in the system and that no one, however pure his or her motives, could control. It was an enormously courageous decision. Unfortunately, Mr. Ostin’s solution was short-lived.
THE SAME OLD SONG (ONLY THE CODA IS NEW)
There developed a practice in the fairly recent era of independent promotion whereby the independent promoters themselves would cross the legal line drawn by federal and state laws of bribery, and in particular, the FCC regulation cited at the beginning of this chapter. The record companies, while having insulated themselves from their own employees’ actions, were nevertheless anxious about having to pay such evidently tainted sums to
independent contractors in return for such specific services as getting a record played on a particular radio station and being listed as among the top 25, top 15, top 10, top 5, or #1 songs on such station’s play charts. For, as noted earlier, each of these successful “adds” would generate another few thousand dollars to the independent promoter.
One of the ways in which the record companies have further insulated themselves from the specter of association with unethical and illegal business practices rivals their most ingenious solutions of the past. They have figured out how to pay for independent promotion on the one hand but how not to pay for it on the other. I do not mean that they have found a way to charge someone (in this case the artist) with the cost. That we have already observed. No. Now, they do not even have to suffer the indignity of writing the check! How do they achieve this, the best of all possible worlds? The answer, as I alluded to earlier, is simple: they give the manager the money and the manager is expected to run the radio promotion campaign.
To nobody’s surprise, the independent promotion people hired by the managers at the specific behest of the record company are usually the very people that the record company designates. But the manager, who has no one to whom he or she can shift the responsibility, is the one who will be the focus of governmental interest if the issue ever comes to the forefront again (as in 2006 it inevitably did). Here again there is a disparity between the experienced and the inexperienced. The independent manager who has little experience in such things, or who does not have a trusted network of (honest) promotion people who can present programmers and DJs with rationales for adding their records to playlists, is at a distinct disadvantage compared to the experienced manager who does.
What They'll Never Tell You About the Music Business Page 31
