Payola: The Next Big Storm?

Why This Matters

Author Information
Solomon is a partner at Wilkinson Barker Knauer LLP in Washington. From November 1999 until this past May, he served as chief of the FCC Enforcement Bureau.

Like the “perfect storm” that led to the strongest indecency
crackdown in FCC history, recent events could produce a wave of aggressive FCC
enforcement of payola and related sponsorship-identification rules.
Broadcasters ought to take protective action, and the FCC needs to be careful
not to interfere with broadcasters' editorial discretion and First Amendment

Nearly two years ago, FCC Commissioner Jonathan Adelstein began calling
for more FCC action on payola and sponsorship identification. Recently, a
series of high-profile revelations have focused attention on government-
sponsored video news releases (VNRs); columnists or experts being paid to tout
products or political positions on the air; gifts from record promoters to disk
jockeys; and plain old “pay for play.” Some have questioned whether program
producers, promoters and others are making the required disclosures to
broadcasters and whether broadcasters are exercising enough diligence about
on-air disclosures. An advocacy group began a campaign to flood the FCC with
e-mails about the issue. Congress held hearings, and enactment of VNR
legislation appears imminent. New York Attorney General Eliot Spitzer last week
announced a $10 million settlement with Sony BMG Music Entertainment regarding
“gifts” to radio stations for airplay.

The FCC has announced two payola/sponsorship-ID
investigations—involving Armstrong Williams and “pay for play”
allegations at a radio station in Buffalo, N.Y.—and released a public notice
strongly warning broadcasters (and others) about their disclosure and
due-diligence responsibilities regarding VNRs. This spring, Commissioner
Adelstein encouraged members of the public to file complaints in what he
referred to as a “neighborhood-watch” approach to payola/sponsorship-ID
enforcement. More recently, he called for an FCC investigation as a follow-up
to the New York settlement.

It is unclear whether this is the tipping point for a new round of FCC
investigations. In any event, broadcasters certainly should promptly take steps
to ensure they are complying with the law. This means disclosing payment or
consideration (even to others) to air program material, and reasonable
diligence to find out about such payments from their employees and program
suppliers. It also means redoubling efforts to learn about and disclose sources
of program material that is political or involves controversial issues, even if
it is provided for free. Compliance by broadcasters now may forestall the need
for strong FCC enforcement later.

If the FCC decides to move more aggressively in enforcing payola and
sponsorship-identification rules, it would be wise to be sensitive to the
editorial discretion and First Amendment rights of broadcasters, particularly
relating to news and public-affairs programming. And overly burdensome
interpretations of disclosure rules, or stricter requirements, could deter
broadcasters from airing certain news and public-affairs programs that would
serve the public interest, and may even run afoul of the First Amendment.