FCC Enforcement Bureau Issues Payola Advisory

One week after Senator Marsha Blackburn raised a payola concern in a letter to the FCC, the Enforcement Bureau issued a February 6 advisory to all broadcasters warning about compliance with its payola rules and a related criminal federal statute. The Advisory suggested that stations might be engaging in “covert manipulation of airplay” based on musical artist participation in station promotions or events.  Just over two weeks later, FCC Chairman Brendan Carr fired off a letter to iHeart Media expressing concerns over their actions since the advisory and compliance actions for their upcoming country festival station event in Austin.

Senator Blackburn’s letter reported musicians being invited to broadcast station events for reduced or no compensation as a condition to airplay of their music. The advisory raised concerns that if stations are determining airplay based on artist participation in station promotions or events for reduced or no pay, and not disclosing those arrangements on air, a payola violation might result.

Payola is the unreported payment to—or acceptance by—employees of broadcast stations, program producers, or program suppliers of any money, service, or valuable consideration to achieve airplay for any programming. Section 507 of the Communications Act requires those persons who have paid, accepted, or agreed to pay or accept such payments to report that fact to the station licensee before the involved matter is broadcast. In turn, Section 317 of the Act requires the licensee to announce that the matter contained in the program is paid for, and to disclose the identity of the person furnishing the money or other valuable consideration.

These restrictions are part of the FCC’s Sponsorship Identification rule 73.1212.  In addition, the FCC rule requires broadcasters to exercise reasonable diligence to obtain from its employees, and from other persons with whom it deals information to enable the licensee to comply with the sponsorship identification requirements. Varying degrees of diligence are expected depending on station formats.

The Chairman’s letter requires iHeart to provide information by March 6^th on its dealings with artists, their compensation for the festival versus other venues, whether airplay is being promised, what protocols iHeart has in place to police payola matters, and what actions iHeart took after the advisory was issued.  At the time of our newsletter publication, the 10-day period had not run so iHeart’s response or lack thereof was unknown.

These developments should prompt all broadcast stations to examine their payola policies and review how they exercise diligence to prevent payola violations. To be clear, if payment for airplay is disclosed on air at the time an artist’s music is played, then there is no payola violation.  It is certainly permissible to have music artists perform for free at station events if there is no promise of increased airplay of their music. But if there is such a promise, it must be disclosed on air.