Beset by surging promotion costs, the music industry is planning to call for a federal investigation into payola in the increasingly deregulated radio business.
Record companies and artist unions were busy Wednesday preparing a letter to Congress and the Federal Communications Commission, urging officials to probe questionable promotion practices by Clear Channel Communications Inc. and other powerful radio station chains and to drastically strengthen payola rules, which they contend are being violated regularly.
The letter, drafted by a coalition of trade groups including the Recording Industry Assn. of America, is expected to be released Friday and challenges the legality of such common practices in the music business as independent promotion.
It's been 40 years since the enactment of the federal payola statute, which prohibits radio stations from accepting money for playing songs without disclosing that information to listeners. Record companies have gone to great lengths to avoid using such sponsorship tags, and independent record promoters have flourished since the 1980s.
A handful of promoters attempt to sidestep the federal anti-payola law by paying broadcasters annual fees they say are not tied to airplay of specific songs and then charging record labels when a song is added to a radio station's playlist.
Record executives have been complaining for years about the soaring cost of promoting records to radio through intermediaries. Since Congress deregulated the radio business in 1996, the industry has consolidated drastically, and Clear Channel now owns about 1,225 radio stations, or 10% of U.S. stations.
Record label executives complain that the payments to independent promoters have swelled to an estimated $150 million annually, sources said, but the labels' influence in getting new music on the air has weakened.
Clear Channel and Radio One Inc. infuriated record companies recently after announcing that record labels must use designated independent promoters to pitch songs to music programmers at their broadcast chains.
The record firms and various trade groups now want the government to probe the effect of radio consolidation on the music community and the listening public.
"We are deeply concerned about payola and payola-like practices, as well as the problems caused by radio station ownership consolidation... ," said the companies and unions in a confidential draft of the letter obtained by The Times late Wednesday. "New rules must be written by the FCC to prohibit payments to radio stations from 'independent promoters' unless such payments are announced."
