U.S. music industry seeks federal 'payola' inquiry

By Steve Gorman LOS ANGELES, May 23 (Reuters) - The recording industry from artists to major labels joined on Thursday in a rare show of unity to demand

By Steve Gorman

LOS ANGELES, May 23 (Reuters) - The recording industry fromartists to major labels joined on Thursday in a rare show ofunity to demand tougher laws barring what they called"payola"-like promotion of music played on the radio.

They also called for a sweeping government review of radioindustry consolidation.

Deregulation of the radio business and rampant practicesthat skirt 40-year-old anti-payola laws stifle competition,drive up music promotional costs and make it harder for newartists to gain attention, the artists and record labels saidin a joint statement addressed to the federal regulators andCongress.

The statement was endorsed by a broad coalition of tradegroups, led by the powerful Recording Industry Association ofAmerica (RIAA), which represents major music companies, alongwith several talent unions and the Grammy-sponsoring NationalAcademy of Recording Arts and Sciences.

But a spokeswoman for the nation's biggest radio stationgroup, Clear Channel Communications Inc. , which wassingled out for criticism in the letter, dismissed the RIAA'scomplaints as "absurd." She insisted that decisions aboutairplay are driven strictly by research showing what the publicwants to hear.

Federal law bars radio stations from accepting payments inexchange for playing particular songs on the airwaves -- apractice known as "payola" -- unless that information isdisclosed to listeners.


But the music industry coalition says the law is widelycircumvented by broadcasters and independent radio promotersthrough business practices that "we consider a de facto form ofpayola." Artists, in particular, are hurt because under mostrecording contracts, promotional costs come out of theirroyalties, said Michael Bracy of the Future of MusicCoalition.

In essence, payments are funneled indirectly tobroadcasters from music labels through independent promoters,who ostensibly pay for advance playlist information provided bystation groups but use their influence to get certain songs onthe air, the coalition said.

"There is widespread concern in the music community aboutaccess to the public airwaves and the way independent promotionhas evolved," RIAA spokeswoman Amy Weiss told Reuters.

"It's been 40 years since the government has enacted payolalaws to address this practice, and it seems appropriate for thegovernment to take a fresh look at this issue."

The groups also criticized broadcasting giants, such asindustry leader Clear Channel, which owns 1,225 stationsnationwide, for flexing their "sheer market power" in ways thatcan "make or break a hit song."

Since the radio industry was deregulated by Congress in1996, Clear Channel and three other large station groups nowaccount for 63 percent of the 41 million listeners who tuneinto "contemporary hit radio," or Top 40, program formats, theletter said. As a result, decisions about what songs getairplay have become increasingly centralized, it said.

But Clean Channel spokeswoman Pam Taylor said airplay isbased solely on research into listeners' musical tastes, andthat research is what the labels, through independentpromoters, are paying for.


"There is no relationship between dollars and airplay,"Taylor said. "In the end, what matters is whether or not ourprogramming works and we have listeners, and our advertisers,therefore, want to pay to be on the station."

She said the independent promotion business bemoaned by thelabels are a product of the music industry, not broadcasters.

"It is blatantly absurd that they attempt to hold the radioindustry accountable for the creation or execution of businesspractices that they control," Taylor said. "The money comesfrom them."

She also disputed the notion broadcasting consolidationhas homogenized radio, saying cross-ownership often has led toa more diverse array of formats in a single market.

And she denied as "unequivocally false" assertions by themusic industry that big, vertically integrated companies likeClear Channel, which own concert promotion businesses as wellas radio stations, refuse to give airplay to artists whosetours are promoted by rivals.