Is pay-for-play finally finished?

Congress has the music industry's modern-day payola scandal in its sights. But will that help the dying record biz save itself?

By Eric Boehlert

Feb 20, 2003 | Amid a flurry of topics covered at the Senate Commerce Committee's recent hearing on radio consolidation and the rise of industry behemoth Clear Channel Communications, one issue in particular seemed to pique the interest of several senators: "pay-for-play." This refers to what some critics have called a modern-day payola scandal, the murky system by which record companies pay influential independent promoters to get songs on commercial radio.

It seems Congress is sending a bipartisan message about pay-for-play: Clean up the funny business.

After listening to testimony from Eagles lead singer Don Henley, who decried pay-for-play as nothing more than extortion artists and record companies must face in order to have a chance at commercial airplay, conservative Sen. Kay Bailey Hutchison, R-Texas, said she was concerned about what "appears to me to be a sophisticated way an artist is required to pay money to be on major stations," and suggested updating the nation's payola laws.

Liberal Sen. Russ Feingold, D-Wis., reported, "Artists are very concerned that playlists are no longer based on quality -- subjective as that is -- but are sold to the highest bidder instead."

And addressing a broadcast lobbyist who defended radio clients against allegations they illegally profit from the indie payments, Republican Sen. John McCain of Arizona noted, "I'm very interested in your statement that your members do not take cash or gifts in exchange for airplay." The clear implication was that if McCain found out differently he'd summon the lobbyist back for an explanation.

The next forum to examine pay-for-play could be the Senate Judiciary Committee, which may take up the issue in coming weeks, according to several Beltway observers. "It's picking up steam in a hurry," says one Capitol Hill source.

Some broadcasters have gotten the message about the pay-for-play contracts they sign with indies. "I'm going to phase them out and not renew any," one radio chief tells Salon. Although these agreements are legal and highly profitable for stations, the broadcaster says they're no longer worth all the controversy they attract.

Nothing would make record companies happier than to see pay-for-play die. Even though the five major music labels essentially created the indie promotion system decades ago, they can longer control it and have been searching for a way out. Now their sights are set on Washington. Working through the Recording Industry Association of America, the major labels are hammering out a petition to file with the Federal Communications Commission, asking that it revisit and update its nearly half-century-old payola laws so they reflect today's marketplace.

"If Congress were interested in the issue, that would be a welcome addition," says Cary Sherman, president and general counsel of the RIAA. "And if Congress holding hearings were to spark the interest of the FCC, all the better."

The irony is that if and when Congress moves to curb indie promotion -- and that still remains a big if -- the practices it uncovers may be radically reduced from what they were just two years ago. That's because, thanks to two parts economics and one part courage, the record companies, battered by falling CD sales and vanishing profits, are finally taking control of radio promotion and cutting back on indies.

"Payments are being cut back dramatically and the system is being dissolved," insists a major label promotion executive who, like many insiders who discuss this sensitive topic, requests anonymity. "We're not intimidated by them anymore; I think it's the beginning of the end. If the government closes down the indies, the music industry would be excited because it would save us the exhaustion of doing it ourselves."

Nobody inside the industry thinks indies will go away completely, because record companies will always need a third party they can turn to in order to help create hits. "It's a bit naive to think that lobbying or influence peddling will disappear just because the industry's having financial problems," notes one longtime independent promoter.

But there's a fundamental shift underway that radically reduces the money indies take in, and the influence they exert. That's good news for artists, who end up shouldering roughly half the cost of indie promotion based on their recording contracts. The bad news is that insiders doubt that curtailing indies will do much to loosen playlists or make commercial radio more adventurous.

Musicians are anxious for relief from pay-for-play, but they're reluctant to address the topic publicly for fear that indies could retaliate by trying to keep the artists' songs off the radio. Testifying before Congress, Henley spoke on behalf of the Recording Artists Coalition, a lobbying group that represents more than 100 acts, including Offspring, the Dixie Chicks, Beck and Bruce Springsteen. No doubt they're glad that Henley, who has sold in excess of 50 million albums in his career and doesn't have to worry about scoring another hit single, is willing to step out publicly on the issue.

Next Page: "We're in a boat and there's water coming in. Labels look at indies and say, 'You're driving us out of business'"

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