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Government to Get $12.5M in Payola Settlement

Radio listeners weary of hearing the same songs over and over may have something to cheer about: Broadcasters have tentatively agreed to anti-payola settlements that could shake up music playlists at some of the nation's largest radio chains.

Four major broadcast companies would pay the government $12.5 million and provide 8,400 half-hour segments of free airtime for independent record labels and local artists, The Associated Press has learned.

The agreement is aimed at curbing payola -- generally defined as radio stations accepting cash or other consideration from record companies in exchange for airplay. The practice has been around as long as the radio industry and was made illegal after scandals in the late 1950s.

Two Federal Communications Commission officials, who spoke on condition of anonymity because final language has not been approved by the full commission, said the monetary settlement is part of a consent decree between the FCC and Clear Channel Communications Inc., CBS Radio, Entercom Communications Corp. and Citadel Broadcasting Corp.

The settlement was reached at the same time as a separate deal designed to lead to more airtime for smaller record companies and their lesser-known artists as well as local musicians.

The American Association of Independent Music, a group of independent record labels, has received a commitment from the same four broadcasters for the free airtime, the officials said.

In addition to airplay, the broadcasters and the independent labels have also negotiated a set of "rules of engagement" that will guide how record company representatives and radio programmers interact.

The free airtime would be granted to companies not owned or controlled by the nation's four dominant music labels -- Sony BMG Music Entertainment, Warner Music Group, Universal Music Group and EMI Group.

Payola, or "pay-for-play," can be difficult to track.

In recent years, independent record promoters have acted as middlemen to deliver payments to radio stations in exchange for airplay. Other forms of inducement include lavish prizes meant for listeners that wind up going to station employees, promises by record companies of concerts by well-known artists in exchange for airplay, and payments for promotional expenses and station equipment.

Under the FCC consent decree, broadcasters would agree to closer scrutiny in their dealings with record companies, including limits on gifts, a promise to keep a database of all items of value supplied by those companies, the employment of independent compliance officers to make sure stations are following the rules and a new "payola hot line" for employees to report infractions.

Broadcasters would admit to no wrongdoing under the three-year settlement, which would end an FCC investigation into payola practices.

Under the separate agreement, the new "rules of engagement" are aimed at requiring equal access to radio music programmers for all record companies as well as transparency in their dealings, said Peter Gordon, who has been leading the negotiations on behalf of the independents.

Gordon is president of Thirsty Ear Recordings, an independent record label, and has been in the music business for 31 years.

"It's absolutely the most historic agreement that the independent community has had with radio," he said. "Without a doubt, nothing else comes close."

Commissioner Jonathan Adelstein, himself an amateur musician, has been in the forefront of the payola fight and has been credited with working out the settlements. "I love music and I want radio to sound fresh, dynamic and real. But payola gets in the way of authenticity because money drives the music, not its quality," he told the AP.

Pay-for-play scandals have not been a high priority for the FCC. The last time it took action was March 2000 when Clear Channel-owned stations KHKS-FM in Denton, Texas, and WKQI-FM in Detroit, Mich., were assessed fines of $4,000 each.

Most of the recent headlines regarding payola have been generated by former New York Attorney General Eliot Spitzer, now governor, who has criticized the FCC's inaction. He made settlement deals with the four major record labels totaling $30.1 million, as well as with two broadcasters, CBS and Entercom, for another $6.25 million.

Federal law and FCC rules require broadcasters to inform listeners if a station is being paid to play a song. The FCC can fine its licensees, but any criminal investigation would be undertaken by the Department of Justice.

When finalized, the consent decree will result in the second-largest fine ever issued by the FCC -- if a recently reported $24 million settlement with Univision Communications Inc. regarding children's television obligations is also approved.

The broadcasters represent four of the six largest radio firms in the U.S. and own a combined total of 1,653 stations. The cash breakdown on the settlement is Entercom, $4 million; Clear Channel, $3.5 million; Citadel, $2 million; CBS, $3 million.

Representatives of the companies could not immediately be reached for comment Monday.

FCC Chairman Kevin Martin was widely credited with pushing through the large cash settlement. Speaking generally, FCC spokeswoman Tamara Lipper said of the payola issue that "the whole point is that people should know when they're being influenced and by whom."

In a statement Monday, Commissioner Michael Copps said pay-for-play "cheats radio listeners and will not be tolerated." Radio, he said, is "supposed to be our pipeline to exciting, local undiscovered acts -- not more nationalized pablum from big media companies."