Payola: Should Internet Radio Stations Be Able to Accept Pay for Play While Over-the-Air Stations are Statutorily Precluded?

by Jennifer I. Swirsky, Candidate for JD, Nova Southeastern University, Shepard Broad Law Center, swirskyj@nsu.law.nova.edu

The Legal History of Payola

The first introduction of legal retribution for accepting payola was in the sixties when a man was indicted for accepting money to play an artist’s music.[1] Subsequent to his indictment, a statute was passed making it a misdemeanor to engage in the activity of accepting payola, punishable “by up to $10,000 in fines and one year in prison.”[2]

Section 317 of the Communications Act, originally enacted in 1934, was amended to include a requirement for broadcasters to disclose whether they exchanged “money, services or other valuable consideration” for the act of airing particular content.[3] Thus, in and of itself, it is not illegal for a radio station to accept a payment from a record label or management company.[4] It is only illegal if both parties involved in the agreement do not disclose that an agreement has been made, in accordance with the Communications Act.[5]

Statutory Language

All matter broadcast by any radio station for which any money, service or other valuable consideration is directly or indirectly paid, or promised to or charged or accepted by, the station so broadcasting, from any person, shall, at the time the same is so broadcast, be announced as paid for or furnished, as the case may be, by such person: Provided, That “service or other valuable consideration” shall not include any service or property furnished without charge or at a nominal charge for use on, or inconnection with, a broadcast unless it is so furnished in consideration for an identification in a broadcast of any person, product, service, trademark, or brand name beyond an identification which is reasonably related to the use of such service or property on the broadcast.[6]

Section 508 of the United States Code also requires any radio station employees who accept payment for the broadcasting of particular content to report the agreement to the station at which they are employed.[7] Further, if any person involved in the production of a program enters into such an agreement, that person is required to disclose the details to the station at which he or she is employed.[8]

Based on a literal reading of the above statutory language, the law applies to radio stations and employees of those stations.[9] However, the ambiguities created by the language in the statute have led to questions about whether the terms of the law should apply to Internet radio.[10] In response, attorneys have argued that, though the federal statute can be interpreted as excluding other businesses, state law commercial bribery statutes have been relied on in the past to prosecute those involved in payola scandals.[11]

The Future of Payola—Should Internet Radio Stations Be Subjected to Payola Laws?

While statutory language is meant to be interpreted beginning with its plain language, ambiguities cause the reader to consider the framer’s intent. The statutory language in question here plainly provides that secretly exchanging money for radio airplay is illegal, but the language has not been amended since before the Internet’s prominence. The question to ask is whether those who created the statute would have intended for another means of transmission to come into fruition and bypass the laws they enacted. Most likely, this was not the intent. Because interpretations will vary, the easiest proposed solution to make is to simply amend the statute to include the words “by use of any method of transmission” so Internet stations cannot escape the ties that bind traditional radio stations and so those who read the language literally cannot argue that anything excluded from an enumerated list of methods was intentionally left out. However, amending a statute is not conducive to a time-sensitive issue.

The reality is that the Internet stations are representing themselves as radio stations. They are listed as radio stations on Internet search engines; their websites refer to them as radio stations. If the people behind the technologically advanced radio station are admitting to the classification of “radio station,” the statute that specifically addresses “radio stations” should apply. Section 317 does not discuss the means of transmission that said “radio stations” must use in order for the ban on pay for play to be effected. The word “broadcast” does not assume use of radio waves, as broadcasting is the act of transmitting from a radio or television station, not the act of transmitting via radio waves. If these Internet radio stations are voluntarily tagging themselves with the title “radio station,” they are also voluntarily subjecting themselves to the laws that govern those radio stations. If Internet radio stations want to be excluded from the reach of statutory law prohibiting the acceptance of payola, they should separate themselves from the “radio station” family. And even if it is determined that the statutory language of Sections 317 and 508 does not pertain to Internet radio stations, state commercial bribery laws shall undoubtedly forbid these stations from accepting money in exchange for airplay.

Therefore, the answer to the instant issue is simple: No, Internet radio stations are not precluded from abiding by the statutory provisions that bar over-the-air radio stations from accepting money in return for airplay. As a means of communication, the FCC should expand its bureaus to embrace the technological advancements of today. Expansion of one of its bureaus or an addition of a bureau assigned to regulate communication through the Internet would place Internet radio stations under the same scrutiny as over-the-air radio stations. The Internet should not be an outlet that allows unbridled freedom of speech and ignorance of the law. Instead, the Internet should be regulated as is any other more traditional means of communication. Though musicians are not solely relying on radio play to achieve successful music careers, the charts and industry awards still consider the number of “spins” a song acquires when considering chart placement, nominees, and winners. As long as radio is holding any bearing on an artist’s career, payola should be banned for all radio-like entities.

[1]. Payola, History of Rock, http://www.history-of-rock.com/payola.htm (last visited May 21, 2009); see also Posting of Robin Cartwright to Nimah Mazaheri, http://www.straightdope.com/columns/read/2176/whats-the-story-on-the-radio-payola-scandal-of-the-1950s (Aug. 31, 2004).

[2]. Id.

[3]. Payola and Sponsorship Identification, Federal Communications Commission, http://www.fcc.gov/eb/broadcast/sponsid.html (last visited May 21, 2009). Section 507 of the Act continues and states that if the promise of money, services, or consideration to air specific matter is made, the disclosure must take place prior to the broadcast over the station that engaged in the exchange. Id. The station and the other party must both satisfy the disclosure requirement to meet the provisions of Section 317, and failure to disclose is punishable by fines, imprisonment, or both. Id.

[4]. See id.

[5]. Id.

[6]. 47 U.S.C. § 317 (2008). 

[7]. 47 U.S.C. § 508 (2008).

[8]. Id.

[9]. See id.; see also David Oxenford, Payola on Internet Radio–Legal?, http://www.broadcastlawblog.com/archives/internet-radio-payola-on-internet-radio-legal.html (Sept. 10, 2008).

[10]. Oxenford, supra note 9.

[11]. Id. Oxenford’s blog specifically mentions Eliot Spitzer’s recent prosecution and “the prosecution of legendary disc jockey Alan Fried . . .” The state statutes for commercial bribery that those prosecutions were brought under should force Internet radio stations to be cautious. Id.