FCC Looks Into Radio Stations’ Promotional Deals With Labels

Federal Communications Commission investigators are exploring whether some of the nation’s largest radio chains are skirting payola laws by cutting promotional deals with record labels and others, sources said.

The inquiry follows a series of articles in The Times reporting that Chancellor Media, Emmis Communications and Cumulus Broadcasting may have tried to use their leverage to extract deals that could affect the airplay of songs at stations owned by the chains.

FCC officials have already met with lawyers for Cumulus, a Milwaukee-based firm, over their relationship with an independent consultant who paid the broadcaster $1 million for the exclusive right to pitch songs to senior executives who could influence airplay at the chain’s stations.

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

Now that the FCC is getting involved in the issue, it could launch a formal investigation that could lead to disciplinary action and fines against some of the stations. It could also short-circuit the industry’s new approach to deals, in which broadcasters seek money from the recording industry.

The FCC is also looking into a deal under which Chancellor billed a record company $237,000 for a marketing campaign that appears to have had a significant effect on airplay of a specific song. In addition, officials are reviewing a program offered by a Chicago station owned by Emmis that promised airplay to record firms as part of a promotional package, sources said.

The new promotional arrangements were criticized in The Times two months ago by Sen. Paul Wellstone (D-Minn.) and Rep. John Conyers Jr. (D-Mich.), who called for an FCC probe.

In January, The Times reported that independent promoter Jeff McClusky signed a $1-million deal with Cumulus, a broadcast group that owns 210 radio stations, for the exclusive right to pitch new songs for airplay to top brass at Cumulus. Under the arrangement, he was not obligated to play any record McClusky promoted, but it agreed to provide him exclusive access to the top executives at the broadcast chain and its Stratford Research arm. In an interview for the Times report, a Cumulus official said the deal generated a new revenue stream for the corporation and did not violate the law.

Following publication of the article, Richard Weening, executive chairman of parent Cumulus Media Inc., contacted the FCC’s enforcement division and requested a meeting. Lawyers from Cumulus met with officials in February and provided the FCC with a copy of the contract for review.

“There were several areas of the contract that initially troubled us,” said Charles Kelly, chief of enforcement in the mass media bureau of the FCC. “We reviewed the agreement and suggested that there might be a problem that could require sponsorship identification in some situations.”

In phone interviews Tuesday, Weening and McClusky said they instructed their lawyers to revise the language in the contract to comply with requests from the FCC. Cumulus then submitted the altered contract for review to the agency, which approved it.

This week, the FCC is reviewing a marketing campaign under which Dallas-based Chancellor charged A&M; Records a total of $237,000 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; Philadelphia; Boston; and Orlando, Fla.

Chancellor and A&M; said the contract included no provision to guarantee airplay. 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. 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--has denied that airplay of Adams’ song at the four stations was explicitly tied to its marketing campaign with A&M.;

Calls to Chancellor executives went unreturned Tuesday.

The FCC is also reviewing a promotional campaign launched last year by Chicago radio station Q101, which is owned by Emmis, an Indianapolis-based radio group with 16 stations.

A document obtained by The Times shows that Q101 explicitly promised airplay to record companies as part of a promotional package: “For $3,500 [to Q101] you will receive: 30 guaranteed spins the first week . . . 20 guaranteed spins the second week . . . .”

Three months ago, Emmis Chairman Jeff Smulyan said the campaign--which applied only to songs already added to the station’s playlist--did not violate the law. But on Tuesday, Smulyan said the corporation decided to halt the program shortly after publication of The Times article.

“We started to question that program very vigorously and decided to kill it,” Smulyan said in a phone interview. “We thought that, even though it was a good way to get marketing dollars, the program led to too much confusion. I still think there is no reason that the radio industry should not be able to find new revenue streams from the record companies. The hard part is putting together some meaningful programs that work for everybody.”