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Payola, in the music industry, is the illegal practice of payment or other inducement by record companies for the broadcast of recordings on commercial radio in which the song is presented as being part of the normal day's broadcast, without announcing that there has been consideration paid in cash or in kind for its airplay adjacent to the recording's broadcast. Under US law, a radio station can play a specific song in exchange for money, but this must be disclosed on the air as being sponsored airtime.
The term has come to refer to any undisclosed payment made to cast a product in a favorable light (such as obtaining positive reviews). Some radio stations report spins of the newest and most popular songs to industry publications. The number of times the songs are played can influence the perceived popularity of a song.
The term payola is a combination of "pay" and "ola", a common suffix of product names in the early 20th century, such as Pianola, Victrola, Amberola, Crayola, Rock-Ola, Shinola, or brands such as the radio equipment manufacturer Motorola. Payola has come to mean the payment of a bribe in commerce and in law to say or do a certain thing against the rules of law, but more specifically a commercial bribe. The FCC defines "payola" as a violation of the sponsorship identification rule that in 2005-06 resulted in tens of millions of dollars in fines to cable corporations in New York.
In earlier eras there was not much public scrutiny of the reasons songs became hits. The ad agencies which had sponsored NBC's radio/TV show Your Hit Parade for 20 years refused to reveal the specific methods that were used to determine top hits, only stating generally that they were based on "readings of radio requests, sheet music sales, dance hall favorites and jukebox tabulations". Attempts to create a code to stop payola were met with mainly lukewarm silence by publishers.
Prosecution for payola in the 1950s was in part a reaction of the traditional music establishment against newcomers. Hit radio was a threat to the wages of song-pluggers. Radio hits also threatened old revenue streams; for example, by the middle of the 1940s, three-quarters of the records produced in the USA went into jukeboxes. Still, in the 1950s, independent record companies or music publishers frequently used payola to promote rock and roll on American radio; it promoted cultural diversity and disc jockeys were less inclined to indulge their own personal and racial biases.
Alan Freed, a disc jockey and early supporter of rock and roll (and also widely credited for actually coining the term), had his career and reputation greatly harmed by a payola scandal. Dick Clark's early career was nearly derailed by a payola scandal, but he avoided trouble by selling his stake in a record company and cooperating with authorities. Attempts were made to link all payola with rock and roll music. In 1976, inner-city urban soul DJ Frankie Crocker was indicted in a payola scandal, causing him to leave NY radio, where his influence was greatest. The charges were later dropped and he returned to NY, hosting MTV's video jukebox.
The issue was featured in a 1978 episode of WKRP in Cincinnati, where Johnny Fever's morning show replacement (when Johnny left to take a new job in Los Angeles) was caught taking cocaine as a bribe to play certain records from a label that he was associated.
Payola to DJs is less of a concern today because they rarely are involved in choosing the songs. Modern radio is widely based on company-delivered playlists, often scheduling every song, commercial break, and DJ talk time, and most shows are pre-recorded well in advance of their broadcasts. Especially with shows that are voicetracked from elsewhere where an off-air assistant may choose the playlists rather than the DJs themselves, local radio staff have little to no input on a playlist outside of special but rare segments where a local artist might be spotlighted, or contests where local artists are offered the opportunity to open a station-sponsored concert or music festival for more well-known acts.
Congressional payola investigations
The Congressional Payola Investigations occurred in 1959, after the United States Senate began investigating the payola scandal. Among those thought to have been involved were DJ Alan Freed and television personality and host Dick Clark.
The term Congressional Payola Investigations refers to investigations by the House Subcommittee on Legislative Oversight into payola, the practice of record promoters paying DJs or radio programmers to play their labels' songs. Payola can refer to monetary rewards or other types of reimbursement, and is a tool record labels use to promote certain artists. Other forms of payola include making arrangements to purchase certain amounts of advertising in exchange for staying on a station's playlist, forcing bands to play station-sponsored concerts for little or no money in order to stay in a station's good graces, and paying for stations to hold "meet the band" contests, in exchange for air time for one of the label's newer, lesser-known bands.
The first major payola investigation occurred in the early 1960s. DJ Alan Freed, who was uncooperative in committee hearings, was fired as a result. Dick Clark also testified before the committee, but survived, partially due to the fact that he had divested himself of ownership interest in all of his music-industry holdings.
After the initial investigation, radio DJs were stripped of the authority to make programming decisions, and payola became a misdemeanor offense. Programming decisions became the responsibility of station program directors. As a result, the process of persuading stations to play certain songs was simplified. Instead of reaching numerous DJs, record labels only had to connect with one station program director.
Labels turned to independent promoters to circumvent allegations of payola. This practice grew more and more widespread until a 1986 NBC News investigation called "The New Payola" instigated another round of Congressional investigations.
With the creation of Napster and other now illegal music sharing websites, the power of the independent promoters began to decline. Labels once more began dealing with stations directly.
In 2002, investigations by the office of then-New York District Attorney Eliot Spitzer uncovered evidence that executives at Sony BMG music labels had made deals with several large commercial radio chains. In July 2005, the company acknowledged their improper promotional practices and agreed to pay a $10 million fine.
A different form of payola has been used by the record industry through the loophole of being able to pay a third party or independent record promoters ("indies"; not to be confused with independent record labels), who will then go and "promote" those songs to radio stations. Offering the radio stations "promotion payments," the independents get the songs that their clients, record companies, want on the playlists of radio stations around the country.
This newer type of payola was an attempt to sidestep FCC regulations. Since the independent intermediaries were the ones actually paying the stations, it was thought that their inducements did not fall under the "payola" rules, so a radio station need not report them as paid promotions.
Former New York State Attorney General Eliot Spitzer prosecuted payola-related crimes in his jurisdiction. His office settled out of court with Sony BMG Music Entertainment in July 2005, Warner Music Group in November 2005 and Universal Music Group in May 2006. The three conglomerates agreed to pay $10 million, $5 million, and $12 million respectively to New York State non-profit organizations that will fund music education and appreciation programs. EMI remains under investigation.
Concern about contemporary forms of payola prompted an investigation during which the FCC established firmly that the "loophole" was still a violation of the law. In 2007, four companies (CBS Radio, Citadel, Clear Channel, and Entercom) settled on paying $12.5 million in fines and accepting tougher restrictions than the legal requirements for three years, although no company admitted any wrongdoing. Because of the increased legal scrutiny, some larger radio companies (including industry giant Clear Channel) now flatly refuse to have any contact with independent promoters.
Clear Channel Radio through iHeartRadio launched a program called On the Verge that required the stations to play a given song at least 150 times. One of the songs that benefited was Iggy Azalea's "Fancy".
As money laundering scheme
In Mexico, South America and some regions of the U.S. southern border, it is common to hear the sudden appearance of "new artists", mainly in folk radio stations, who are not known in the music industry, have no previous career and with no explanation of where they come from. These music groups and singers start to appear consistently on radio, television and public broadcasts with a strong promotion of their concerts. This happens for a fixed amount of time, and in the same sudden way they appear, they stop their promotion and disappear from the music scene, or change their stage name. Such artists are commonly manufactured by producers of dubious origin, who pay payola and do events in order to launder money from drug trafficking, prostitution or other illegal operations.
The Federal Communications Commission (FCC) and the Communications Act of 1934 both have strict requirements and rules regarding the issue of payola. Both the FCC and the Act demand that "employees of broadcast stations, program producers, program suppliers and others who, in exchange for airing material, have accepted or agreed to receive payments, services or other valuable consideration must disclose this fact. Disclosure of compensation provides broadcasters the information they need to let their audiences know if material was paid for, and by whom." But even with these requirements in place, big-time record companies have found loopholes to continue the practice legally.
The reason why record companies have managed to find relatively big loopholes in an otherwise complex and strict document is because of the wording. According to the current regulations in place, it is still considered legal to pay to play a particular song on the radio. The only hitch is that the broadcaster has to reveal who paid. In addition, the disclosures must be from DJ to station manager to program director and upwards. The loose wording has created a loophole that makes it easier for wealthy record company officials to pay the DJs large sums of money to play certain songs a certain number of times at a given time during the day. The loophole has created a "grey market, one in which shady, quasi-legal deals take place, and independent artists lose out more often than not."
The loophole has made it sure that independent artists will be isolated from mainstream media. And a current example of this is the lengths Macklemore and Ryan Lewis went to get their music heard. Because Lewis and Macklemore belonged to an independent label, they feared payola laws would interfere with their airtime. So they “hired an independent arm of Warner Music Group, the Alternative Distribution Alliance, which helps independent acts get their stuff on radio. Zach Quillen, manager of Macklemore and Ryan Lewis, discussed how "they paid the alliance a flat monthly fee to help promote the album."
One side effect of the vagueness of the law and the creation of the loophole is the expansion of the concept at the hands of online music sharing websites. In 2009, the website Jango created a plan to do payola legally by saying they have been paid to play the songs. "For as little as $30, a band can buy 1,000 plays on the music-streaming service, slotted in between established artists The artists themselves choose what other music they'd like to be played next to."
Another side effect with payola is that it is not just limited to the music industry anymore. The TV industry has engaged in a form of payola with interviews. Networks deny paying for interviews, but are willing to pay large sums of money in cases that garner a lot of attention. An example is the Casey Anthony case in 2011. It was reported that ABC News paid Anthony around $200,000 for personal photographs.
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