David Oxenford

By: David Oxenford, Wilkinson Barker Knauer

When in January I offered my predictions as to the issues that the new FCC would be considering this year, payola and musical artists complaining of being coerced to play for free at radio station concerts or other events was not on the bingo card.  That changed early this past week when Tennessee Senator Marsha Blackburn sent a letter to FCC Chair Brendan Carr stating that she had received many complaints from musical artists complaining that they were being coerced to play for free at radio station events with threats that, if they did not participate, on-air play of their music would be reduced.

The Senator’s letter suggested that this was a violation of the FCC’s payola rules that prohibit broadcasters from making programming decisions based on the receipt of anything of value for airplay without disclosing that consideration on the air.  The letter’s implication is that receipt of the artist’s concert appearance for free would constitute the consideration and, if that consideration was not disclosed when increased airplay occurred, the station would be in violation of the payola policies.  The letter suggested that the FCC take action to ensure that such coercive tactics were not used to secure  free appearances by musicians at radio station events.  In what seems like record time, the FCC’s Enforcement Bureau responded to the Senator’s letter by issuing an Enforcement Advisory about the issue.  What does that Advisory provide and what are the FCC’s policies payola and sponsorship identification?

The Enforcement Bureau did not ban broadcasters from asking bands to play at station events for free or reduced compensation, but it did warn that any “deals” for bands to play at station events in exchange for more airplay, or any threats (express or implied) to reduce airplay if a band did not appear at an event, would be seen as a violation of the rules.  The Bureau referred to such threats as “covert manipulation of radio airplay.”  The Advisory states “[w]hen payola causes stations to broadcast programming based on their financial interests at the expense of community responsiveness, the practice is inconsistent with localism.”  It goes on to state:

It is important to note, however, that an artist’s decision to appear at a station’s promotion or event without compensation is permissible, provided that the appearance and any associated station broadcasts otherwise satisfy the requirements of the Act and the FCC’s rules, including but not limited to section 317 of the Act and section 73.1212 of the Commission’s rules

This would seem to suggest that a commercial station could agree to increased airplay for an artist’s appearance at an event, if the consideration (the agreement to play for free) was disclosed on the air each time the artist’s songs were played.  This may not be practical – and any such agreement and the required on-air disclosures should be carefully vetted by legal counsel, as the laws in this area provide significant penalties (see below) and there is always a potential for inadvertently going beyond what is allowed.

The Advisory went on to warn that payola is not only prohibited by FCC rules, but it also is a criminal violation (in the past, there have been very significant fines issued by the FCC for payola violations, as well as penalties under federal and even state laws for payola activities – see, for instance, our articles here and here).  As noted in the Advisory issued last week, stations must exercise care to make sure that no content is run on the air where the station or any employee or agent receives undisclosed consideration (see our article here).  Stations should even make inquiries to assure themselves that syndicators and other program suppliers (and their employees) are not themselves engaging in payola practices in programming provided to the station.

The Advisory notes that the degree of diligence required varies on a station-by-station basis.  For instance, a music station that reports airplay to national music trade publications likely requires more diligence to ensure that no one making music programming decisions receives undisclosed consideration, when there are probably different considerations for a news talk station.  When, about 5 years ago, an FCC Commissioner last looked at these issues about pay-for-play arrangements between record companies and broadcasters, we posted this article talking about some of the steps diligence steps that broadcasters should take as set out in a compliance plan agreed to in a settlement agreement with the FCC on payola issues.

While the advisory issued last week focuses on music programming, all stations need to be aware of sponsorship identification requirements.  As we have noted in the past, stations (including television stations) need to be sure that, if they are being paid to air content, or otherwise receive anything of value for the airing of content on a broadcast station, they must reveal that consideration.  We’ve seen that requirement illustrated in big FCC fines to broadcasters for featuring hospital content in news programs where those appearances were part of a contract for advertising on a station, and that financial relationship was not revealed in the newscast (see our article here).  Even the provision of pre-produced video programming to a station that may be aired because it is about some subject of interest to the station’s audience, but which unduly features the products of the party providing the programming (e.g., a travel show that features the cars from the car company providing the program or a health show that features the treatments of the company providing the show) require on-air disclosure (see our article here).  When the programming provided for free deals with controversial issues, the need for disclosure of the source of the programming is even more clear.  Even having a TV host on the air who is paid to promote political ideas can trigger sponsorship disclosure requirements – and diligence obligations by broadcasters to uncover such arrangements (see our article here).  Almost 20 years ago, the FCC had a spate of cases where they aggressively investigated these “video new releases” that were aired without any mention of who was trying to influence the broadcaster’s audience (see our article here).

The FCC wants the broadcast audience to know who is paying to influence them to buy a product or service – or otherwise paying, directly or indirectly, for station on-air content.  The Senator’s letter, and the rapid attention it received from the FCC, demonstrates how seriously the FCC takes these issues.  Broadcasters should consider themselves warned to do their diligence to make sure to not to run afoul of these concerns.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access). There are no additional costs for the call; the advice is free as part of your MAB membership.