Payola’s LAST STAND
By Erik Hage

Corporate-crime buster Eliot Spitzer turns his attention to corruption in radio promotion—not that it’s likely to make the airwaves sound more interesting

He exposed investment-firm corruption and insurance fraud—now New York state Attorney General Eliot Spitzer is going after the music industry (more specifically, how record companies promote their artists on radio). Surely canonization is next.

Spitzer’s probe started last October, when he subpoenaed the major record corporations (all four of them, thanks to media consolidation) for contracts, correspondence and records involving independent radio promoters. The attorney general’s office doesn’t comment on ongoing investigations, but according to a January Salon.com article by Eric Boehlert (“Payola is Dead! Now What Will We Listen to?”), one of the prime chroniclers of independent promotion, Spitzer is most likely aiming his defiant jaw and steely blue eyes at the system to determine “whether labels, indies or stations broke any payola laws.”

An amendment to the Federal Communications Act in 1960 made it illegal for record companies to pay (read: bribe) radio stations to get their artists on the radio (that is, unless the song is introduced and disclosed as a paid advertisement). And while the payola scandal and legendary on-the-take DJ Alan Freed have been immortalized in rock & roll history and film (in the movie American Hot Wax), many would say that payola never really left the building, but simply evolved into a laundering system in which record companies pay independent promoters, who in turn pay radio stations to ensure airplay for recording artists. Or as Courtney Love more succinctly put it, in her own screed against record labels in Salon back in June 2000, it’s “a system where the record companies use middlemen so they can pretend not to know that radio stations . . . are getting paid to play their records.”

Radio has remained, over the years—and despite the emergence of MTV and the Internet—the most effective way to break an artist, and throughout the last several decades independent radio promotion has flourished. But Spitzer’s probe is the latest in a series of setbacks that have eroded the indie promotion system during the last couple of years.

Last month, the attorney general upped the ante when he subpoenaed top executives at SonyBMG, including the CEO of Sony Music (U.S.), Donnie Ienner. According to a May 19 New York Post article, Ienner is “the highest- ranking music executive to be subpoenaed thus far in the ongoing investigation.”

It’s a tribute to Spitzer’s track record and reputation that, by merely beginning to inquire, he has scared radio and record companies alike into abandoning a long-standing practice that is widely regarded as legalized bribery.

It’s also a tribute to what Salon’s Boehlert terms the “smoke-and-mirrors economics” of the music industry that few in the general public know what independent promoters are or how they function.

Essentially, the indies make exceedingly large (often six-figure, depending on market size) payments to radio stations. Once an independent promoter has paid a radio station, he becomes an exclusive agent, essentially “guarding” the station’s playlist. Every time a song is added, the indie bills the appropriate record company. And that’s really just the beginning: If the record company wants the song played more, or if it wants the song to remain in steady rotation, there are many other billing options. Supposedly, the money is not actual payment for playing the song, but, as Jeff Leeds pointed out in an October 2004 New York Times article, simply a promotional-support payment in exchange for such niceties as receiving “advance copies of the stations’ play lists.”

Record companies can end up paying more than a million dollars on indie promotion for a high-profile artist. (For some salacious reading on the subject of independent promoters, pick up Fredric Dannen’s 1991 book Hit Men, about promoter Joe Isgro, who fought payola charges in court throughout the ’80s and ’90s. The book is full of drugs, sex and even mob connections.) For record companies, the system is “insurance” and security. It’s simply too risky not to pay the influential promoters—even if the promoters aren’t really responsible for an artist’s success.

It’s also interesting to note that even with the indies’ power faltering, people in the industry are still fearful enough about the promoters’ influence over radio to not talk openly about the system. Boehlert’s articles, for example, rely primarily on statements from anonymous sources at record companies.

But the indie promotion system is in trouble and was so even before Spitzer came along. In 2003, Clear Channel, the indisputable heavyweight champ of radio corporations, dropped its indie promoters. With so many eyes already focused on the media giant—because of its unwieldy power, accusations of monopoly and domination of the radio market—Clear Channel apparently couldn’t afford to be linked to a system of scantily legalized bribery.

The Telecommunications Act of 1996, which completely deregulated ownership of radio, has allowed Clear Channel to buy up nearly 1,300 stations across the United States. (Before deregulation, a corporation could own only two local stations and 28 nationwide.) Before 2003, deregulation and consolidation had allowed certain indies—those who had cozy relationships with big chains like CC—to become even more powerful, milking record companies for exorbitant fees. In the wake of the Act of ’96, indie firms such as Tri State Promotions & Marketing emerged as industry powerhouses. Around the turn of the millennium, the promotion industry had grown to a 150-million-dollar-a-year business.

The Viacom-owned Infinity, another formidable radio force, followed Clear Channel’s lead and severed ties to independent promoters in November, a move that numerous experts (including Boehlert) suggest is once again more about PR than ethics. (If you recall, Viacom received a huge black eye, much FCC scrutiny and unprecedented fines for TV indecency over the Janet Jackson Super Bowl disrobing early that same year.) And, of course, Clear Channel and Infinity have received subpoenas from Spitzer as well.

But Spitzer’s current investigation does raise a few questions. The first, as to the timing of his probe, is perhaps unanswerable. The system once was a formidable, irreverent force that begged for a giant-killer to come along. But recently, the indie-promotion system, as Radio Business Report put it in October of last year, has simply been “drying up” as radio chains small and large abandon it in droves.

The second question one might ask is how exactly does the investigation fit into Spitzer’s statewide jurisdiction, especially if he is looking into breaches involving payola, which is a federal statute? The answer here is probably simple: He is going after an issue that, despite national reverberations, squarely affects New York consumers and businesses. And with Spitzer’s record on corporate corruption, he’s just the advocate to deliver the final death blow to a system that has incited much outcry but little effective action against it over the past couple of decades.

So will radio playlists improve as the corrupt indie system dies out? Not likely. Giant radio chains (Clear Channel is by far the biggest) will continue to flood the market with risk-free, tried-and-true music. (Can the career of Ashlee Simpson be explained in any other way?) The homogeneity that media consolidation breeds is the biggest affront to playlists—not independent promoters—and that’s not going away any time soon. Or, as Neil Young presciently put it in his ’80s song “Payola Blues”: “This one’s for you, Al Freed/Wherever you go, whatever you do/’Cause the things they’re doing today/Will make a saint out of you.”