Payola: FCC's Michael O'Reilly Wants Answers

FCC  Commisioner Michael O'Reilly last week sent letters to three major music labels seeking  responses to questions he has about purported payola practices in the music industry.

O'Reilly sent letters to Wade Leak at Sony Music, Saheli Datta at Universal Music Group and Trent Tappe at Warner Music.  He's seeking information on the mechanisms put into place to prevent payola within their respective organizations, their understanding of the current payola rules, and what further steps may need to be taken, if any.

He's asking the record labels to answer the following questions by the end of February 2020:

"1. As technologies become more complex and include platforms other than traditional over-the-air
broadcasting, what types of arrangements exist between your company and radio broadcast
stations for song placement and frequency of air time?

a. In this context, how does your organization define payola and what specific practices does it deem to be in violation of federal law and FCC regulations?
b. Does your organization deem the solicitation of artist appearances and performances with implied or express benefits, or pressures against non-participation. as legally prohibited?

2. What specific procedures have you developed, adopted, and implemented to ensure that payola, as defined by federal law, does not occur within your organization?

a. What oversight protections do you have in place to report violations and verify’compliance?
b. Are company employees required to be trained in payola prohibitions and potential penalties?

3. Are you aware of any individual or company, in partnership with, or associated with your organization, that has provided or sought to provide monetary benefit, service, or other consideration in violation of current payola prohibitions in the last five years?

a. If yes, how was the conduct addressed?
b. Have any of your organization’s employees, partnerships, or associations been terminated or disciplined due to potential or actual payola violations?
c. Please provide specific details of any such instances.

4. In the last five years, how many times have you or your organization directed a radio broadcast station to include a notification in a broadcast pursuant to the payola statutory provisions?

5. Where do you see the greatest risk for potential violations within the recording industry as it interacts with ever-changing audio distribution technologies, including the radio broadcast industry’?

6. Have existing federal statutes and the relevant internal compliance processes worked to restrict
payola?

a. Where do you see weaknesses in the current approach or need for reform to target and address any remaining violators?"

Last year, commissioner Mike O’Rielly sent an official letter to the Recording Industry Association of America asking the trade organization to investigate “possible violations of federal laws and regulations that expressly prohibit payola.”

“Your association is uniquely situated to survey the practices of your industry and respond to press reports regarding alleged practices,” O’Rielly wrote.

“My primary goal is to get to the bottom of existing industry practices to determine whether the law is being followed or whether any problematic conduct must be addressed.”

The RIAA responded it was not in a position to survey its members’ anti-payola practices and submit responses collectively.

Michael O'Reilly

In his latest letter, O'Reilly, acknowledges that despite competing for listeners, "the U.S. radio industry finds itself subject to payola restrictions when alternative technologies, such as streaming, Internet radio, podcasts and other commercial audio distribution platforms, do not.

"This asymmetric treatment has an impact on the radio industry’s financial well-being, perhaps even affecting its long-term sustainability. Moreover, as the lines between these different technologies are  becoming more blurred each day, the compliance difficulties facing dynamic radio companies that deliver content via multiple distribution methods and those that interact with them increase as well. As proposals are considered to update laws and regulations to keep pace with the current marketplace, understanding current practices regarding anti-payola compliance is crucial for lawmakers and regulators."

The Federal Communication Commission moved to prohibit undisclosed pay-for-play in 1960 following a congressional investigation of corruption at radio.

“Payola has never been illegal,” explains Tony Gray, a veteran of urban radio and the founder of Gray Communications. “What is illegal is if you do the transaction and don’t make it known to the audience that there was some financial support for you playing that song.”