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Radio Gives Payola a Facelift to Stay Afloat

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Radio relevance is dying. Last week Billboard eluded to the fact that hospice should be called -- album sales (as of the week ending May 30, 2010) are the lowest in Soundscan history. Read that as one of radio's main uses (to sell albums) has been whittled away.

I'm glad I don't own local radio stations in today's marketplace. Everyone is out to get them. The FCC is watching stations with a magnifying glass. Radio advertising revenue is drastically dwindling. Streaming radio is getting huge. Satellite radio is a direct competitor and pulling away big talent. Plays on the radio are not translating into actual sales. Even the artists don't like them.

Kid Rock told me in a 2008 interview, "Radio stations and award shows are who can suck the best dick. That is all they are -- period. The people who get played on the radio are not making the best music." Tough words for a dwindling infrastructure.

Radio will take a bone wherever one is thrown and major labels have paid an arm and a leg to have their songs played frequently on stations across the nation. If that means radio plays songs that don't exactly win artistic merit awards, and that radio treads back down the age old payola road, they have no choice but to abide. Their levees won't hold without the income stream.

Last time the payola conversations were heavy was in 2005, when the former New York State Attorney General Eliot Spitzer (before getting caught having sex with many high priced call girls and then resigning) took the record labels to task on their bribes. As the dust settled, the fines were doled out: Warner Music anteed up $5 million, Sony BMG came in with $10 million, and Universal topped the chart with $12 million -- all because they were caught in the age old trap of trying to have their money pave the way for their songs onto the FCC dictated radio stations. And that doesn't float.

John Dingell (D-Mich.), chair of the House Commerce Committee, grilled the FCC on their inability to reel in payola in a modern context. Peter Hart, an analyst with Fairness & Accuracy in Reporting (a media watch dog group), says in a San Diego Union-Tribune interview, "I think the main lesson from the last couple of years is that the record labels and the radio business have found ways to get around the rules by creating new and different forms of payola [...] So the regulators are often one step behind, trying to play catch-up with what the industry is doing."

Enter the new era of payola:

We have all heard the age old ticket scalper method: "Buy this pencil from me for a hundred bucks and I will throw in the concert tickets for free." I have no idea if this method, in fact, has any clout -- and I doubt if it holds its weight in a court of law, but the concept at its core seems well thought out. Transfer the power to another object -- away from the point of contention. That is exactly what radio stations have done in this new payola era.

Kid Rock elaborates in an interview with me about the new concept of radio station bribery which uses sponsored concerts as major revenue generators:

It's the politics across the board that all the stations play. They want you to come play their radio show. I can go into a market and make $250,000 playing. They want me to come in and pay me $100,000 so they can make $150,000 and they will play my songs. They play my songs, it's cool, I get hits, but the record company makes all the money. So it's kind of an evil axis. You play as much of the game as you can, and you still try to be yourself and not sell your soul.

So this is the new payola silhouette. Maybe it's legal, most likely it's not -- considering it appears that FCC dictated airwaves are still being leveraged for a decrease in artist payment/increase in radio station's piece of the concert pie. But just like the pencil on the side of the sports stadium, this concept changes the context of the game and grays the legalities associated with the process.

I don't think we can blame radio for desperately trying to grab hold of one of the last viable music profit streams, the live show, and harness their revenue there. After all, radio employees are trying to feed their families and their business model has been ripped to shreds. The nagging problem persists on many radio station program directors minds -- how long are artists going to continue to concede such hefty concert royalty checks for airplay promises that don't equate to income? If this gravy boat begins to run dry -- is there another well available for radio to tap?

One thing is for sure, the complete music ecosystem is under fluctuation. And a domino doesn't fall to the ground alone. The FCC can try to go after radio for new payola practices, but my grandma's favorite expression comes to mind: You can't get blood from a turnip.