Record Labels Big Three

Universal Music Group has joined the other two major record label conglomerates in refuting reports that pay-to-play is rampant in radio. UMG says it has had promotional guidelines in place since 2006 that incorporate federal anti-payola laws and has “devoted significant resources” to implementing and enforcing that policy. “We believe that those statutes help ensure that our music is judged on its own merits,” Senior VP Saheli Datta said in a letter to the Federal Communications Commission.

The letter, made public Wednesday, is part of an investigation by FCC Commissioner Michael O’Rielly into allegations of potential violations of pay-to-play rules. His review began last fall after a story was published in Rolling Stone last August, which quoted some broadcasters alleging record promoters were using cash apps and directing money to corporate accounts in exchange for spins.

Last month the FCC released responses from Sony Music and Warner Music Group in which both record companies said they continue to abide by a 2005 agreement with the New York Attorney General’s office limiting promotional activities and training record company employees about how to comply with anti-payola laws.

Yet UMG wasn’t as black-and-white in its denial as its counterparts. It acknowledged that the labels under its umbrella use independent record promoters to work records to radio stations. But the company said it “has no visibility into the details of the arrangements between the radio stations and the independent promoters.” It did say that if a UMG employee becomes aware of a violation of the pay-to-play policy, the company has a 24-hour hotline to anonymously report the abuse.

The FCC’s payola investigation isn’t a priority, given a focus on COVID-19 related issues. But O’Rielly told Inside Radio the information so far suggests reports of payola may be overblown anyhow. Yet it’s too soon to say for sure, he said, and by making the three record companies’ letters public the next step is to see whether anyone can come forward and refute what has been communicated to the FCC and back up any allegations with evidence.

O’Rielly has previously said he’d be open to considering modifications to the payola rules since they represent another way broadcast radio is being put at a disadvantage. That’s because services such as Spotify, Pandora and Apple Music aren’t required to comply with the same regulations. Because the FCC’s rules are required under federal law, it would take an act of Congress to update or eliminate the statute. O’Rielly said Wednesday it’s something he would consider advocating if no credible allegations of payola surface or any that do appear can be refuted.

“It may be something that we’re able to recommend to Congress that the provision is no longer needed and therefore is something that can be taken off the books, especially as it relates to how radio broadcasters are now competing in the marketplace for listeners,” O’Rielly said. “I’m very mindful of the burdens we ask of radio and television broadcasters, and it behooves us to eliminate every burden we possibly can that is unnecessary.”

No broadcaster has weighed in on the legally sensitive matter that has cost the industry millions of dollars since the turn of the century. But an update to federal statues would have the backing of UMG. Datta said the emergence of digital music services that aren’t required to comply with the payola standards that govern their relationship with radio has “complicated” things for labels. And there are other new ripples too. “There is a variety of new technologies in the radio industry, including the use of artificial intelligence in the setting of radio playlists, and it is not known how these technologies will affect radio promotion,” Datta said.