The Honorable Kevin Martin
Chairman, Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Dear Mr. Chairman:

The Future of Music Coalition is encouraged by recent press reports that the Commission is launching an investigation to examine allegations of commercial radio licensees engaging in an illegal practice: payola.[1] Without question, FMC believes this is a tremendously important issue for musicians and the public, and we are glad to see the Commission is willing to shed much needed sunlight on this shadowy practice.

We are writing today to reiterate our belief that the flagrancy of labels and station owners and the pervasiveness of this practice cannot be examined outside the context of the drastic consolidation in the radio industry following the 1996 Telecommunications Act. 

FMC and other artist organizations have consistently urged the Commission to recognize the independent radio promotion structure that developed in the 1990s as a once-removed form of payola.[2] Most prominently, we discussed payola in our 2002 study “Radio Deregulation: Has It Served Citizens and Musicians?” This report, which was filed in the Broadcast Ownership proceeding (MB 02-277), argued that consolidation in the radio industry, coupled with consolidation in the recording industry, made conditions more ripe for payola by reducing the number of gatekeepers and facilitating secretive, payola-like business practices.[3]

We were heartened when the Commission included payola in its 2004 Notice of Inquiry into Localism in Broadcasting (MB 04-233). In the NOI, the Commission stated:

When payola causes stations to broadcast programming based on their financial interests at the expense of community responsiveness, the practice is inconsistent with localism.

Then the Commission posed a number of key questions including:

What are the various types of payola practices today, and how frequently do they occur?  Do these practices comply with the disclosure requirements of the Act and our sponsorship identification regulations?  Are the existing rules in any way deficient in addressing the current practices? […] Are the Commission’s current disclosure requirements sufficient to ensure that listeners understand the nature of the programming they hear?  Do radio stations seek payment for back announcing – that is, announcing songs and artist information after a song is played?  If so, does this practice violate our sponsorship identification rules? [4]

We saw this as a clear indication that the Commission was at the very least aware of the widely reported accusations.  Now that New York Attorney General Eliot Spitzer has announced the initial findings of his wide-ranging investigation, it is becoming clear that major radio companies did engage in business practices that, at the very least, deserve a full and immediate investigation by the Commission.

For this reason, as the Commission approaches its next review of the broadcast ownership rules, we respectfully request that you first complete a comprehensive investigation of radio consolidation and payola before moving ahead with any rulemakings that would allow for a) further radio deregulation, or b) the granting additional resources to commercial radio broadcasters during the transition to HD radio.

First, it would be irresponsible for the Commission to further loosen local ownership regulations, as the NAB has recently requested [5], before understanding the relationship between consolidation and payola.

Second, HD radio greatly expands the capacity of each station licensee by increasing the number of uses of their licensed spectrum.  It would send the wrong signal to the public and to the commercial radio industry if the Commission were to let the HD radio transition proceed without first identifying which of these commercial broadcasters is guilty of engaging in payola.

Commissioner Adelstein stated recently that radio stations that have engaged in the practice of payola “are putting their licenses at risk”.[6] If this is true, we should not inadvertently reward these bad actors with added capacity without establishing a full investigation into payola allegations, and setting measurable public interest guidelines that will ensure that musicians and the public are served well in the future.

In conclusion, FMC urges the Commission to take the following steps:

• Launch a full and thorough investigation into allegations of payola in the commercial radio industry.

If alleged payola-like abuses are found to be true:

• The Commission should pledge to hold bad actors in the radio industry accountable.

• The Commission should not grant the benefits of HD multicasting to the commercial radio industry without first establishing specific, measurable public interest guidelines.

• The Commission should not consider any rule changes that would pave the way for further consolidation in parallel markets, including lifting the ban on broadcast-newspaper cross-ownership.

• The Commission should take steps to protect and expand non-commercial radio, including low power FM.

Future of Music Coalition reiterates our willingness to work with the Commission in any way as you continue your efforts to manage and regulate the public airwaves.

Sincerely,

Jenny Toomey, Executive Director
Michael Bracy, Policy Director
Kristin Thomson, Deputy Director
Future of Music Coalition

February 15, 2006

Cc:
Commissioner Deborah Tate
Commissioner Jonathan Adelstein
Commissioner Michael Copps

Notes

1. “Hundreds of Radio Stations in Payola Probe”, by Chuck Taylor, Billboard Radio Monitor, February 13, 2006 http://www.mediaweek.com/mw/news/tvstations/article_display.jsp?vnu_content_id=1001995176

2. Joint Statement on Current Issues in Radio, May 24, 2002

“Radio Deregulation: Has It Served Musicians and Citizens?” November 18, 2002 (MB 02-277)

Revised Joint Statement on Current Issues in Radio, October 8, 2003

FMC/AFTRA/AFM Joint Comments on Digital Audio Broadcasting Systems and Their Impact on the Terrestrial Radio Broadcast Service (MM 99-325), filed June 16, 2004

FMC Comments on Localism in Broadcasting, November 1, 2004 (MB 04-233)

3. “Radio Deregulation: Has It Served Musicians and Citizens?” November 18, 2002, pp. 60-67.

4. FCC, Notice of Inquiry on Broadcast Localism (MB 04-233), July 1, 2004, p. 14.

5. Letter from NAB President David K. Rehr to FCC Chairman Kevin Martin on Media Ownership, February 8, 2006 http://www.nab.org/newsroom/pressrel/Filings/MartinLetterOwnership2-8-06.pdf

6. “Report: FCC Conducting Huge Payola Probe,” Radio and Records, February 10, 2006
http://www.radioandrecords.com/Newsroom/2006_02_10/reportfcc.asp