CLEARCHANNEL BUCKLES UNDER FED PRESSURE AND ENDS PAYOLA

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New Consent Decree Will Force Big Radio to Play Indie Music

March 5th, 2007

Moses Avalon

Well, well. I never thought I would live to see the day, but I did. In a landmark settlement announced today radio monolith ClearChannel as well as three other radio conglomerates have bowed their heads in shame and tentatively agreed to pay the FCC $12.5 million in fines for payola. But they didn’t stop there. Part of a sister settlement will require Big Radio to provide about 16,000 hours of free airtime for independent record labels as a form of reparations.

Two FCC officials would only speak off the record until final details are ironed out. But the skinny is this: a consent decree between the FCC and Clear Channel Communications Inc., CBS Radio, Entercom Communications Corp. and Citadel Broadcasting Corp, has been reached wherein these entries will cough up the cash and be required to allocate 8200 half-hour blocks of airtime each for small labels to garnish public awareness in their artists.

Allegedly, the free airtime would be granted to companies not owned or controlled by one of the nation’s four dominant music labels — Sony BMG Music Entertainment, Warner Music Group, Universal Music Group and EMI Group.

Also under the new deal, broadcasters would have to keep a data-base and log of all gifts and promotional items they receive from label and independent promoters, so that the station may be audited for potential graft and abuse. There will even a new “payola hot line” for employees to report infractions.

Good news it seems for small labels except that the FCC and we, in the business have a couple of things to consider:

–How a label will be defined as “not controlled by one of the nation’s four dominant music labels” will be very challenging indeed, when one considers that RIAA affiliated labels touch 80-90 of the product in the retail market space in one way or another (Even indie distributors like RED and Fontana are controlled by majors like Sony and UMVD.) And…

–Can you imagine being the whistle blower, (likely an intern at a radio station) with the type of serous disregard for their career it would take to call the FCC when they spot “potential infractions.”

— 16,000 hours sounds like a lot until you start carving it up among the 3000 active indie labels in the US.

–We have now successfully invited government regulations into our industry. In fact, Big Radio is financing Fed intervention with the $12.5 million in fines to be paid. We already have the Fed influencing compulsory rates. Isn’t that enough? Who knows what will come next. And, finally…

–None of this will apply to satellite, HD or internet radio. Only terrestrial radio, which some feel is losing market share by the hour.

So… too little, too late? I don’t think so. Despite the cautions above, I’m really an optimist. And unlike some of my other bloggy pundents, who have given up on terrestrial radio I still believe in it as a strong platform for getting new music in the ears of the general public– if you could afford to. In the past, this was near impossible. Now, it will still be hard but hope springs eternal with this new ruling not only because it makes a point but because it will likely influence other decisions along these lines in the future. Imagine, if you will, a future ClearChannel being caught violating this decree and being required to post 50,000 hours of free time. That starts to hurt.

I believe that this a major victory for the little guy even if the Fed will make a few million off the deal. Small labels have something reasonable to compete for and low-budget Indie promoters will be tooling up to get their clients on the block for this “free time.” If you use a radio promoter, expect a call from him sometime this week.

Hopefully, the $12 large in fines will go towards policing the efforts to make sure that small shell-companies or three-deep labels, owned by majors (who often refer to themselves as “indies”) will not be able to get their hands on this precious gift. With new opportunity, will certainly come new opportunists.

The world just got a bit more interesting.

Reporting from the front,

Moses Avalon

For more on the story go here: http://biz.yahoo.com/ap/070305/payola_settlements.html?.v=8

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