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Cox Radio Rejects Payola-Like Practice

The station chain owner will stop accepting fees from independent record promoters.

October 18, 2002|Jeff Leeds | Times Staff Writer

Cox Radio Inc., one of the nation's largest radio chains, plans to sever its ties with independent record promoters to distance itself from a payola-like practice rampant in the music business.

The decision makes Cox the first big broadcaster to revolt against the record labels' three-decade-old practice of hiring independent "middlemen" to push songs to radio programmers. Critics say the promoters' existing deals with major radio companies smack of payola, or undisclosed payments made in exchange for airplay.

"We felt uncomfortable with these relationships because the system does invite abuse," said Robert Neil, Cox Radio's chief executive. "The record companies have been trying to get people to play records in different ways for a long time. The more we found out about this, the less comfortable we became."

Cox will not renew contracts with record promoters whose contracts have expired in recent weeks, Neil said, and will end its remaining promotional contracts as they expire during the next year. Independent promoters, including Jeff McClusky and Jerry Brenner, currently have deals with 14 of Cox's pop, rap and rock music stations and pay Cox an estimated $1 million a year in "promotional" fees.

McClusky and Brenner could not be reached for comment.

Atlanta-based Cox, a unit of Cox Enterprises Inc., runs 79 radio stations, with major outlets in Miami, Long Island, N.Y., and across the South. It ranks seventh nationally in the number of stations owed but is third in sales.

"It's about time a major radio company took this step," said Peter Hart, an analyst with watchdog organization Fairness & Accuracy in Reporting. "Cox is making a wise decision....But this is only the first step. This practice still demands a congressional investigation. Other companies won't take the same step without pressure."

Radio scandals in the 1950s prompted the passage of the federal anti-payola statute, which prohibits radio stations from accepting money for playing songs unless they disclose it to listeners. Record labels have gone to great lengths to avoid such sponsorship tags and have backed independent promoters since the early 1970s.

The five major record conglomerates now spend about $100 million a year on independent promoters to influence radio airplay. Promoters attempt to sidestep the anti-payola law by paying radio stations annual fees -- often exceeding $100,000 -- that they say are not tied to airplay of specific songs. In return, stations give promoters advance copies of playlists. Promoters then bill record labels for each new song that gets played.

"They're paying you $100,000 a year just to know what your adds [newly added songs] are? Why is that of value to them? It makes no sense unless they feel they have some influence on their individual records," Neil said. "If somebody put you in front of a congressional committee and asked you to explain this, would you want to do that?"

This year, record industry officials called for a federal investigation into the radio business, saying independent promoters often violated the law and stifled new music getting airtime.

Sen. Russell D. Feingold (D-Wis.) has introduced legislation to ban the practice. In the last three years, the Justice Department has reviewed complaints about cash payments allegedly made to programmers at urban stations, and obtained payola-related tax convictions against several record label and radio executives in the Latin music field.

Hilary Rosen, chief of the Recording Industry Assn. of America, applauded Cox's move, saying, "I'm sure regulators will look favorably on this."

Record executives also criticize Clear Channel Communications, the nation's biggest radio broadcaster with 1,200 stations, and Radio One, the largest chain catering to African American audiences, for requiring record labels to pay designated promoters to pitch songs to their stations.

Clear Channel could not be reached for comment late Thursday. In the past, the company has said its promotion deals are legal. This year, a Radio One executive said her company would be "crazy not to try to tap into" the millions of dollars labels spent on independent promotion by authorizing a single promoter to represent the company.

Neil, a 43-year-old former program director, said Cox decided "it's not worth it to sacrifice your ethics for that bit of money. This is a way to show you're going to be responsible in a world where people sometimes aren't responsible."

Even after independent promoters lose their contracts with Cox stations, Neil said, record executives could directly offer money, travel packages or other bribes to station personnel. But he downplayed the idea that his programmers would be swayed: "We have a level of ethics and integrity at our urban, top 40 and rock stations such that I have a level of confidence it won't happen."

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