For 40 years, federal law has prohibited broadcasters from accepting money or anything of value in exchange for playing songs on the radio without disclosing the practice to listeners.
But internal documents obtained by the Los Angeles Times indicate that several independent promoters keep detailed logs--called "banks"--listing the date a station airs a song followed by a dollar amount collected from the artist's label. The stations that add the most songs over the course of a year build the biggest banks and consequently earn the largest fees.
Like a bank account, there are debits and credits, deposits and withdrawals. The promoter makes "deposits" when the right songs are played and "withdrawals" for the station to receive payment in the form of cash, travel and tickets to events.
The documents show that each of the five major record companies--Vivendi Universal, Sony, Bertelsmann, AOL Time Warner and EMI Group--paid fees to an independent promoter associated with a Portland, Ore., radio station that played songs produced by their labels. Officials for these record companies declined to be interviewed.
Experts say the newly disclosed bank data could threaten the licenses of numerous stations.
"This document destroys the notion that the new payola is any different from the old payola," said Peter Hart, an analyst for the New York-based media watchdog group Fairness & Accuracy in Reporting.
"What you have here is a smoking gun. This document confirms suspicions that critics have long had about potential tit-for-tat arrangements between independent promoters and radio stations. An appropriate government investigation could blow this whole industry wide open."
Federal agents already are deep in a four-year probe of corruption in the radio business. Five executives from Latin music labels and radio stations have pleaded guilty to payola-related tax offenses. And last year, Clear Channel Communications, the nation's largest radio conglomerate, was fined for a payola violation involving a promotion that guaranteed airplay of a song by pop singer Bryan Adams in exchange for a series of free performances at concerts sponsored by its station.
Officials at the Federal Communications Commission and the Justice Department declined to comment on their investigations and on the bank arrangements.
Music Promotion Process Revealed
The world of music promotion and influence peddling is a murky one that is usually kept out of public view. Independent promoters dodge the tit-for-tat rules of payola by paying broadcasters annual fees they say are not tied to airplay of specific songs.
Practitioners of this $100-million-a-year trade--largely hidden under layers of arms-length alliances and thick legal opinions--seek to determine the songs that will reach the airwaves and climb the music industry charts. The newly obtained documents detail exactly how the process works, who is paid and how much, and how radio stations, promoters and the world's largest record companies say they keep their arrangements one step inside the law.
The documents include a sales pitch to prospective clients by Michele Clark Promotion, a Calabasas-based firm, that outlines a "sample bank." The company denies that such pacts cross the line into illegality.
"We aren't doing anything wrong here," Michele Clark said in an interview. "The support I get from labels has no effect whatsoever on the musical decisions of the program directors at my stations."
Besides, Clark said, the practice is widespread throughout the industry. "I didn't invent this thing. It's standard operating procedure in the promotion business. Every [independent promoter] in nearly every format uses it."
She added: "Every indie keeps internal accountings of what stations are worth. You base the value of a station on what you are able to bill on their behalf. Obviously, the more a radio format helps sell records, the higher the stakes will be for the labels--and the higher the budgets paid by indies to the stations involved."
Clark's firm caters to stations in the album adult alternative, or AAA, format--quiet rock music that accounts for only a sliver of U.S. music sales. The money funneled into AAA station banks is a pittance compared with what music conglomerates throw around in the industry's biggest radio formats, such as top 40, alternative and rock.
Indeed, record labels pay independent promoters as much as $4,000 per song to influence airplay at the nation's biggest broadcast outlets. And many labels have exclusive deals with promoters who operate under the same bank formula, promotion and label executives say.
Clark provides broadcasters with annual fees as high as $120,000 to defray expenses for contest giveaways, vacation fly-aways, concerts, conventions and other promotions, the documents show. The labels pay her about $1,000 per song that gets added to a playlist.
According to one document, Clark earned about $50,000 last year for songs added to the playlist at Portland, Ore.'s KINK-FM, a division of Viacom-owned Infinity Broadcasting. The bank lists every time KINK aired a song followed by a specific dollar amount and the name of the label Clark billed for the play time.
For example, after KINK added a song by Fiona Apple on Jan. 17, Sony's 550 label paid Clark $1,000, the bank says. Vivendi Universal's Mercury label paid Clark $1,000 on Feb. 14 after KINK added a song by Kim Richey. Bertelsmann's Windham Hill label, EMI Group's Capitol label and AOL Time Warner's Giant label each paid about the same fee for songs by Janis Ian, Shivaree and Steely Dan, according to the bank.
Another document, titled "non-money stuff," shows a list of songs played by KINK and a corresponding list of products or services, including concert tickets and a promise that certain acts might appear later at a station benefit.
'We Don't Do Anything Illegal or Unethical'
Clark and the station management deny that the paperwork is an accounting of songs aired in exchange for payment of products or services.
"The document you have in your hand is typical of the kind of paperwork most independents use for their private bookkeeping," KINK Program Director Dennis Constantine said in an interview. "I don't know how it got out. But we don't do anything illegal or unethical here. No matter what the companies pay [Clark] or what she writes in that bank, it has absolutely no bearing on how we program this station."
Clark's bank includes a running tally of withdrawals for Clark-financed contest prizes given to KINK listeners. In addition, Clark deducted nearly $3,000 for registration fees, plane tickets and hotel accommodations for two KINK employees to attend trade conventions.
Clark said it is common practice for independent producers to "sponsor" radio station employees at trade conventions and cover the costs of their expenses. Constantine agreed, but said attorneys for Viacom have recently issued a policy forbidding KINK employees from taking money for trade show junkets. In a recent interview, Viacom Chief Operating Officer Mel Karmazin said the corporation will not tolerate questionable promotion tactics at Infinity stations.
Clark is not the only promoter pitching easy-listening broadcasters with bank proposals. The Times reviewed a similar arrangement from one of Clark's competitors in the AAA format, Los Angeles-based Harry Levy. Levy declined to comment.
Most of the nation's top promoters keep bank tallies, including Bill McGathy, whose New York-based promotion firm rules the rock radio format. Internal records show that McGathy logs fees collected from labels for added songs as well as for the value of concert appearances at station events brokered by his firm.
McGathy declined to comment for this story.
Privately, some independent promoters brag about their ability to influence programming, label sources say. But they sing a different tune in their contracts, furnishing stations with language steeped in anti-payola warnings drafted by former FCC attorneys.
Those contracts specify that independent promoters are free to pitch specific songs to broadcasters, but the broadcasters are not obligated to add any song to their playlists. All radio stations need to do in exchange for an annual fee is give promoters advance notice of which songs they plan to add to their weekly playlist. The promoters in turn bill the labels for each song that gets added.
Record executives have long operated under the premise that independent promoters have the power to influence the success of certain songs, either by getting them added to a station's playlist or by keeping them off the air.
The bank disclosure comes at a time when Clear Channel, which controls 1,200 radio stations, is considering bids for an exclusive $20-million contract from several promoters, including Cincinnati-based Tri-State Promotions and Chicago-based Jeff McClusky Promotions.
Cumulus Media, a Chicago-based broadcast group that owns 210 radio stations, already has negotiated a $1-million pact with McClusky, whose firm has nearly 100 stations across the nation tied up in exclusive deals.
Clark and other independent promoters interviewed for this story contend that every promotion pact--regardless of its size or format--is calculated on the same bank principle.
"When an indie promises a station a $40,000 annual budget, that number doesn't come out of thin air," Clark said. "The station has got to be worth something to the record companies."Copyright © 2015, Los Angeles Times