Clear Channel to Cut Promoter Ties

Bowing to political pressure, Clear Channel Communications Inc. said Wednesday that it would sever ties to a coterie of music industry middlemen who have paid millions of dollars to the radio giant while seeking to influence airplay.

The move by the nation’s biggest radio conglomerate follows criticism from lawmakers who said Clear Channel’s deals with independent record promoters ran afoul of payola laws, which prohibit stations from playing songs in exchange for money without disclosing the transaction.

The decision marks an abrupt reversal for the company, whose broadcasting empire includes more than 1,200 radio stations. In July, Clear Channel President Mark Mays told The Times that the company would accept promotional fees as long as record labels were willing to pay, saying it was a “fiduciary obligation to our shareholders.”

But Clear Channel radio division chief John Hogan said Wednesday that the company decided to terminate the deals “to eliminate even the appearance of impropriety” and smooth the waters in Washington.

Promoters try to sidestep the anti-payola law by paying radio stations annual fees -- often exceeding $200,000 -- that they say are not tied to the playing of specific songs.

In return, stations give the promoters advance copies of playlists or other airplay-related information. Promoters then bill record labels for each new song that gets airtime.

Hogan said the radio operation would not renew its 10 or so contracts with various promoters when the deals expire this summer.

The independent firms, including Cincinnati-based Tri-State Promotions, collectively have been paying Clear Channel an estimated $10 million a year, sources say.

Clear Channel becomes the second major company to distance itself from the practice, after a move by Atlanta-based Cox Radio Inc. in October. Clear Channel’s decision was first reported in the Wall Street Journal on Wednesday.

Record executives noted that the company wasn’t exiting the business of selling music-related services to record labels altogether. It plans to sell airplay research and charge record companies that want private audiences for their artists with Clear Channel programmers.

Some industry insiders noted that even after independent promoters lose their contracts for Clear Channel stations, record executives could directly offer money, travel packages or other bribes to station personnel instead of paying fees to a corporate parent.

Hogan said he didn’t intend to “police” his programmers.

“We have to hire good people and trust that we’ve made the right decisions,” he said. “Integrity and honesty are key components of being part of Clear Channel.”

The company had been under increasing pressure to cut ties with independent promoters in recent months. Federal lawmakers chastised the company during a Senate committee hearing in January. And Sen. Russell D. Feingold (D-Wis.) has introduced legislation to restrict the music industry’s promotional practices.

“While I think Clear Channel Communications has taken a step in the right direction, it is still essential that we pass legislation to ensure that a replacement ‘pay for play’ system does not emerge,” Feingold said.

Record industry leaders applauded Clear Channel’s move.

“This issue has been a sore spot for artists and record labels for quite some time,” said Hilary Rosen, chief executive of the Recording Industry Assn. of America.

Rosen said the Clear Channel decision shows it sees that “there is a better formula for industry partnerships that deliver new music to fans. This step should expand the diversity of music now available.”