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Music

Radio stations are debating whether they should ever accept record company payments to play their music

Radio stations investigated in payola probe

Allegations fuel pay-for-play debate in record, radio industry

Web posted on: Tuesday, July 07, 1998 4:07:34 PM

LOS ANGELES (CNN) -- Radio stations have long received payments from record companies to play their artists. When this dealing goes on under the table, the tactic is called "payola," an illegal practice for which record label Fonovisa is now being investigated in the first big U.S. payola investigation in 12 years.

The Justice Department/IRS probe is a hot issue in the music industry, and was a major topic of discussion at a recent "Radio and Records" convention in New York. The reason: The outcome of the probe could change the music you hear on the radio.

The Fonovisa probe

Fonovisa, owned by the media company Grupo Televisa, is one of the world's leading distributors of music and music videos. The company helped propel the booming Latin music business in the United States with artists like Enrique Iglesias. But sales have fallen ever since the record company's own lawyers contacted federal investigators seven months ago to report that their promotions department was engaging in payola.

Fonovista

The ensuing investigation of Fonovisa also involves dozens of distributors and radio stations, many of them in Los Angeles, where Spanish-language music stations are among the most highly rated.

Investigators have handed out dozens of subpoenas requiring the distributors and stations to turn over payroll records that could help document improper payments to program directors and others.

No arrests have been made, but recent reports claim a number of radio station employees could face criminal charges for payola, a misdemeanor, and tax evasion, a felony. While Fonovisa is the only record label so far under investigation, The Los Angeles Times reported that it is unclear whether the company or any of its employees will be charged.

Enrique Iglesias has helped the Latin music industry boom

What is legal?

Investigators are dealing with a line in the sand that seems to be constantly shifting. After all, payola is legal, if the radio station that plays a song discloses payment from the record company on the air.

One radio station in Portland (KUFO) reportedly took a legal $5,000 payment to repeatedly play a song from the new heavy metal group Limp Bizkit.

The issue was up for debate at the "Radio and Records" convention. Some believe the payment, in effect a radio infomercial, makes sense for record companies.

"As opposed to spending the $300 on a print ad to tell people where to go buy the record, they are spending $300 on the radio to let them hear it to see if they want to buy it first," says WJRR-FM disc jockey Dick Sheetz, who hosts a program that legally plays songs at a price to the label.

'Synergies happening'

Erica Farber, publisher of "Radio & Records" magazine, says pay-for-play is becoming part of the business.

"The music community is trying to figure out how they can sell more product, and as radio is trying to figure out how they can generate more revenue from a category business, there's some different kind of synergies happening," Farber says.

The government is expressing interest on settling the issue. It could lead to new rulings that either allow, or disallow, all payments to radio stations.

Correspondent Paul Vercammen contributed to this report.

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