O'Rielly Queries Music Labels on Payola as He Ponders Deregulation
Federal restrictions against radio payola are “asymmetric” and affect the radio industry’s financial well-being and stability, FCC Commissioner Mike O’Rielly wrote compliance officers at Sony Music Entertainment, Universal Music Group and Warner Music Group. He sought information on how the music labels prevent payola. The letter said O’Rielly’s interest involves broadcasters being treated differently than digital media.
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The regulator told us Tuesday that “it may be” that his inquiry will lead him to push for Congress and the FCC to roll back payola restrictions. “I’m not there yet,” he said. O’Rielly mentioned the possible elimination of the rules in a speech in November (see 1911150054).
The latest letter is a follow-up to a request for similar information O’Rielly made to the RIAA in September (see 1910100036). RIAA said in October it couldn’t provide information about its member companies, and O’Rielly’s office said he would next seek information from companies. The Jan. 16 letter is that next step, he said. “I’m sorry it’s taken us longer than we would have liked.” The music companies didn't comment.
“I seek information on the mechanisms put into place to prevent payola within your respective organizations, your understanding of the current payola rules, and what further steps may need to be taken, if any,” the letter said. It included questions about how the companies define payola, incidents of payola and adhering to payola rules, and whether the current rules work. “As proposals are considered to update laws and regulations to keep pace with the current marketplace, understanding current practices regarding anti-payola compliance is crucial for lawmakers and regulators,” O'Rielly wrote.
The companies aren’t likely to provide substantive responses, broadcast attorneys told us. The companies aren’t FCC licensees, and this is from a single commissioner rather than the full commission, they noted. The correspondence isn’t legally binding, and discussing payola violations with the agency is unlikely to have much of an upside for those publishers, said Pillsbury Winthrop's Scott Flick. If O’Rielly’s investigation turns up violations, the agency likely could punish only the broadcasters, through sponsorship identification rules, attorneys said. It's within the rules for record companies to pay broadcasters to play songs as long as the sponsorship is announced, Flick said.
“The U.S. radio industry finds itself subject to payola restrictions when alternative technologies, such as streaming, Internet radio, podcasts and other commercial audio distribution platforms, do not,” said the letter. As the line between digital and broadcast technologies grows more blurry, “the compliance difficulties facing dynamic radio companies that deliver content via multiple distribution methods and those that interact with them increase as well,” the letter said. If O’Rielly seeks to do away with payola rules, Congress would have to be involved because the rules are based in legislation, industry lawyers said. “I‘m doing what I think is my statutory obligation to find out if there are legitimate issues,” O’Rielly said. “How do you have two different worlds happening with the same audience?”