2 Officials Urge FCC to Probe Possible Payola

Two congressional critics of media consolidation called Wednesday for the Federal Communications Commission to investigate whether radio conglomerates may be trying to skirt payola laws by cutting promotional deals with record labels and others.

The move follows an article in The Times last month reporting that Chancellor Media, one of the nation’s largest broadcasting chains, billed a record label $237,000 for a marketing campaign that appears to have had a significant effect on airplay of a specific song at stations owned by the chain.

In another development, radio giant Cumulus Broadcasting last week began selling access to some of its senior executives. Cumulus cut a $1-million deal with an independent consultant granting him the exclusive right to pitch songs to “decision-makers” who can influence airplay at the chain’s radio stations.

“The Federal Communications Commission should look into the matter,” said Sen. Paul Wellstone (D-Minn.). “These are the kinds of things that occur when there is no real competition. Of all the dangers that go with the increasing concentration of power in this country, the most dangerous is what is happening in the telecommunications industry.”

Rep. John Conyers (D-Mich.) also said he thinks the FCC should investigate the new promotional arrangements.

“The idea that radio stations may have invented new ways of accepting pay-for-play confirms my worst fears about merger mania,” Conyers said. “Everywhere media conglomerates have gained ground, consumers have lost ground. I don’t think Congress should stand by idly.”

Federal law prohibits radio stations from accepting money for playing songs without disclosing the payment to listeners. Representatives for Chancellor and Cumulus deny that their new promotional pacts cross the line into illegality.

Charles Kelly, chief of enforcement in the mass media bureau of the FCC, said the new promotional practices could pose potential problems for the companies involved.

“We have not made a decision yet as to what course we will follow, but this is certainly an area that we could pursue,” Kelly said.

The call for a probe by lawmakers is likely to put pressure on the FCC to take action.

The Times reported last month that Dallas-based Chancellor charged A&M; Records a total of $237,000 for a marketing campaign last fall to promote pop singer Bryan Adams’ new single, “On a Day Like Today,” on a handful of its stations. The campaign, which was built around a series of commercials and contests, also required Adams to perform for free at four Chancellor charity concerts in Detroit; Orlando, Fla.; Philadelphia; and Boston.

Both Chancellor and A&M; say the contract included no provision to guarantee airplay of the song. But a review of reports by Broadcast Data Systems, a firm that electronically samples airplay from hundreds of the top radio stations across the nation, indicated that the Chancellor stations where Adams was scheduled to perform in concert were the only ones that continued to give the song significant airplay after the rest of the country had dropped it.

New data from BDS show that those Chancellor stations also stopped playing the song shortly after Adams performed in concert at their radio shows. Chancellor--which last year cut similar deals to promote several other recording artists--denies that airplay of Adams’ song at the four stations was explicitly tied to its $237,000 marketing campaign with A&M.;

Artist managers complain that dozens of other acts are being pressured by radio stations across the nation to perform without pay at benefit shows, which while providing income for local charities, also bolster ratings and advertising revenue for broadcasters.

Critics say that such arrangements are likely to become more common as radio industry mergers force record companies and marketers to deal with fewer and more powerful radio groups. The joint marketing of airplay, promotions and concerts is an outgrowth of a relentless consolidation in the radio industry since 1996.

Indeed, the huge conglomerates created by the merger wave are particularly hungry for new revenue to justify their expansions. Merging is an expensive process that often leaves the surviving company saddled with debt. Therefore, it is not surprising that the large groups are exploring the money-raising potential of novel marketing campaigns, live concerts and other promotional packages.

On Jan. 1, independent promoter Jeff McClusky signed a $1-million deal with Cumulus Media, a Chicago-based broadcast group that owns 210 radio stations, for the exclusive right to pitch new songs for airplay to top brass at Cumulus.

McClusky, whose Chicago-based firm has dominated the independent promotion market since 1989, is paid to promote records by all five of the nation’s biggest record conglomerates. McClusky said he is on retainer with most record labels and maintains “close relationships” with nearly 100 individual radio stations to whom he pays annual stipends of as much as $100,000 a year.

“You can call it influence, or you can call it perceived influence,” McClusky said in a phone interview from Chicago. “Record companies pay me for three things: access, information and the ear of the program director.

“Access to decision-makers has a price value,” McClusky said. “The only difference in what we’re doing with Cumulus is that now we’re stepping up and offering budgeting considerations for guaranteed access to the very top people at the chain.”

Under the Cumulus arrangement, the corporation is not obligated to play any record he promotes but has agreed to provide him exclusive access to the decision-makers at the broadcast chain and its Stratford Research arm. The hope for record companies is that McClusky can influence which songs they might add each week to the 30 Cumulus radio stations covered under the agreement.

According to a Cumulus memo obtained by The Times, program directors are prohibited from negotiating any future promotion deals directly with record companies and are required to finalize all weekly additions to their playlists with a Stratford consultant--to whom McClusky has direct access each week.

John Dickey, vice president and director of programming at Chicago-based Cumulus Broadcasting, said the deal generates a new revenue stream for the corporation and does not violate the law.

“What Jeff McClusky is really paying for is access to me and the consultants at Stratford Research who are instrumental in the decision-making process of adding music each week to our radio stations,” said Dickey, who is also an equity holder in Stratford Research. “We have purposely centralized this process through my office to prohibit any impropriety.

“McClusky’s people pitch the songs directly to us and are not allowed to having any contact with the program directors at our stations. Whether or not we add any song has no bearing financially on how the deal is structured. By doing it this way, it preserves the integrity of what we are trying to do as a company and minimizes the chance that anything even close to payola will ever happen at Cumulus.”