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COMMISSIONER JONATHAN S. ADELSTEIN
Re: CBS Radio, Inc., File No. EB-06-IH-1109, Order
Re: Citadel Broadcasting Corporation, File No. EB-06-1H-1108, Order
Re: Clear Channel Communications, Inc., File Nos. EB-05-IH-0059 and
Re: Entercom Communications Corp., File No. EB-05-IH-0033, Order
Today, a unified Commission sends a resounding message to the radio
industry: payola, in any form, has no place in radio and will not be
tolerated by the FCC. Payola deprives the listening public of the
country's freshest music, denies local and independent artists a fair
chance to get heard over the public airwaves, and saps the vitality of
radio. In short, payola hurts musicians, the radio industry and the free
flow of creative talent because music is chosen on the basis of who can
pay the most - not who sounds the best.
This agreement is a breakthrough and a milestone in the long fight against
payola in this country. It ends an era of laissez faire pay-for-play and
signals that the cops are back on the beat to enforce the law.
The Consent Decrees and the private agreements between the broadcasters
and the independent music community, particularly the American Association
of Independent Music (A2IM) and Peter Gordon, represent the culmination of
a series of lengthy negotiations among people who care deeply about the
future of radio and the music industry. I personally appreciate the
efforts made by the four companies which negotiated the Consent Decree
with me in good-faith and displayed a genuine willingness to strengthen
their relationships with local, unsigned and independent musicians. Each
company's commitment to showcase the talent of local and independent
artists for more than 4,000 hours indicates dedication to localism, music
diversity, and the public interest.
I am also thankful for the patience and support of my colleagues,
specifically Chairman Martin for his leadership in initiating the
investigation and securing significant monetary contributions,
Commissioner Copps for sharing my insistence on meaningful oversight and
business reform measures, and Commissioners Tate and McDowell for their
interest in this issue.
Today's historic settlement with four major broadcasters - CBS, Citadel,
Clear Channel and Entercom -- is the first of several steps that the
Commission will take to address the allegations of rampant violations of
our sponsorship identification laws, specifically pay-for-play practices
in the radio industry. I strongly encourage other broadcasters who are
implicated or subject to license renewal holds for alleged sponsorship
identification violations to enter into similar agreements with the
Commission and the independent music community. Today's agreement is just
the first wave of this investigation - more waves are coming.
Since 1927, before the FCC was even created, Congress has maintained an
unwavering requirement that broadcasters must announce who gives them
valuable consideration to air anything. The federal sponsorship
identification laws impose an unequivocal, legal obligation - up and down
the chain of production and distribution - to disclose all forms of
consideration. These rules are based on the basic principle that listeners
and viewers are entitled to know who is seeking to persuade them so they
can make up their own minds about the content.
For years, I have been hearing from local and independent artists in
different parts of the country that they could not get airplay on their
local stations. And listeners have complained that that commercial radio
sounded more and more homogenized and generic. As a huge fan of music and
radio, I could not help notice that commercial radio - which was once a
unifying force in local communities - had become increasingly like a
coast-to-coast public address system, often devoid of soul, vitality, and
Nearly every American music genre began with local artists getting played
on local radio shows. Motown, grunge, Elvis and rock n' roll, hip hop,
country, bluegrass, and the Nashville sound began as local music being
promoted by local, independent musicians and labels on local radio. While
each began in a different region of the United States, they all succeeded
because they started getting heard on local radio and then broke out
nationally and internationally. That path to success, and musical
innovation, is hindered by payola since local artists without major
financial backing get crowded out. American radio listeners are the first
to suffer, but music lovers nationwide, and indeed all around the world,
are deprived of new sounds when radio playlists become generic.
Homogenization is good for milk, but bad for radio.
Despite many allegations about widespread payola practices, the FCC had
never investigated those claims, nor had we ever received credible
evidence until then-Attorney General of New York State, Eliot Spitzer,
launched a widespread investigation. He uncovered an arsenal of smoking
guns, involving hundreds of radio stations - FCC licensees -- and the four
major record labels. He aggressively pursued the problem and found vast
numbers of potential violations of federal law.
At my urging, the FCC launched a similar investigation and decided to
focus first on the corporate practices of four large radio station groups
- Clear Channel, CBS, Citadel and Entercom - concerning potential payola
violations. The results of these investigations have enabled us to create
a template for addressing other pending allegations and payola violations
in the future.
While this settlement is not a panacea to all payola woes, it requires the
implementation of certain meaningful reform measures that should change
corporate practices and behavior. The companies commit to enforcing high
standards with respect to the sponsorship identification laws to avoid
violations and the appearance of impropriety in the process of music
selection. Specifically, the companies commit to implement numerous
safeguards, including commitments to:
* maintain a database containing a record to identify all items from
record labels that exceed 25 dollars;
* maintain a company hotline for employees to call the Compliance
Officer to obtain advice and report violations;
* appoint a Corporate-level Compliance Officer who is responsible to
ensure compliance with the Consent Order, and all sponsorship
* designate a Compliance Contact for each market; and
* conduct annual training for all programming personnel and supervisors
The corporate culture of radio should not encourage or promote the use of
the major record labels to subsidize the operating costs of radio
stations. That is why the Consent Decree limits the numbers of electronic
copies of songs and concert tickets, and the permissible value of personal
gifts, meal and entertainment, and travel and lodging expenses. Some
dishonest employees may continue to take money "under the table." While
you can outlaw theft, that doesn't mean stealing will stop. The good news
is that station owners are agreeing to send a clear message that such
practice will not be tolerated by first eliminating some of the more
blatant and abusive practices in the industry.
I believe that these compliance and business reform measures, which are
consistent with the reform measures developed by the New York State
Attorney General's office, will change behavior in certain respects.
Sunshine is truly the best disinfectant. There is a compelling need for
greater and more effective governmental oversight. The FCC should play a
role in ensuring the industry has sufficient safeguards in place. In that
regard, the companies are required to submit annual compliance reports to
the Commission. Additionally and, perhaps, more important, the Consent
Decree provides the Commission with the unequivocal authority to gain
access to the databases upon request.
I applaud the voluntary efforts of the broadcasters and the independent
music community to develop a meaningful way to build and protect a healthy
future for radio. With these efforts, more new music should surface on the
airwaves, and our country's rich cultural diversity can continue to
flourish and enrich the lives of everyone. I believe the good faith
platform these reforms were built upon are sturdy and will develop over
time, but the ultimate success of this initiative depends on the
cooperation of a great number of people. This is a work-in-progress and
will take considerable effort to fully realize. So, even as we take this
critical step, I stand ready to help, whenever necessary, to ensure its
Federal Communications Commission FCC 07-29