Editing Payola (section)

==Modus operandi==
Payola is used by record labels to promote their artists, and can be in the form of monetary rewards or other types of reimbursement. This can include purchasing advertising, requiring bands to play station-sponsored concerts, or paying stations to hold "meet the band" contests. In exchange, the band gains a place on a station's [[playlist#Radio|playlist]] or a lesser-known band of the label may gain air time.

===Third-party loophole===

A perceived loophole in U.S. payola laws is for labels to utilize a third-party or [[independent promoter]] (not to be confused with [[independent record label]]). The promoter would offer "promotion payments" to station directors for putting their client's artists on the station's playlist, sidestepping [[Federal Communications Commission]] (FCC) regulations.<ref>{{Cite journal |url=http://digitalcommons.lmu.edu/cgi/viewcontent.cgi?article=1511&context=elr |first=Rachel M. |last=Stilwell |title=Which Public – Whose Interest – How the FCC's Deregulation of Radio Station Ownership Has Harmed the Public Interest, and How We Can Escape from the |volume=26 |issue=3 |pages=419–428 |date=1 March 2006|journal=Loyola of Los Angeles Entertainment Law Review |access-date=23 March 2015 |archive-url=https://web.archive.org/web/20150319185143/http://digitalcommons.lmu.edu/cgi/viewcontent.cgi?article=1511&context=elr |archive-date=19 March 2015 |url-status=dead }}</ref> As it was seen as falling outside the payola rules, stations did not deem it necessary to report to authorities.<ref>{{Cite web |title=Tax Notes Research |url=https://www.taxnotes.com/research/federal/irs-private-rulings/general-counsel-memorandums/service-policy-with-respect-to-%27payola%27/1fytw |access-date=2023-06-08 |website=www.taxnotes.com}}</ref> This practice became widespread until a 1986 NBC News investigation called "The New Payola" instigated another round of Congressional investigations.<ref name="Howe"/>

In 2002, investigations by the office of then-New York District Attorney [[Eliot Spitzer]] uncovered evidence that executives at Sony BMG music labels had made deals with several large commercial radio chains.<ref>{{Cite news|last=Leeds|first=Jeff|date=12 May 2006|title=Universal Music Settles Big Payola Case |language=en-US|work=The New York Times|url=https://www.nytimes.com/2006/05/12/business/12payola.html|access-date=2 February 2021|issn=0362-4331}}</ref> Spitzer's office settled out of court with [[Sony BMG Music Entertainment]] in July 2005, [[Warner Music Group]] in November 2005 and [[Universal Music Group]] in May 2006. The three conglomerates agreed to pay $10 million, $5 million, and $12 million respectively to New York State non-profit organizations that will fund music education and appreciation programs. [[EMI]] settled in 2006 for $3.75 million.<ref>{{cite news|title=Radio Payoffs Are Described as Sony Settles |first1=Jeff |last1=Leeds |last2=Story |first2=Louise |newspaper=The New York Times |url=https://www.nytimes.com/2005/07/26/business/26music.html |date=26 July 2005 }}</ref><ref>{{Cite news |title=New Settlement in Payola Probe |first1=Brian |last1=Ross |last2=Walter |first2=Vic |last3=Esposito |first3=Richard |publisher=ABC News |date=11 May 2006 |url=http://blogs.abcnews.com/theblotter/2006/05/new_settlement_.html |access-date=14 January 2008 |archive-url=https://web.archive.org/web/20110522014958/http://blogs.abcnews.com/theblotter/2006/05/new_settlement_.html |archive-date=22 May 2011 |url-status=dead }}</ref><ref>{{cite web |title=EMI settles 'payola' probe for $3.75 million |url=https://www.nbcnews.com/id/wbna13343742 |website=NBC News |date=15 June 2006 |access-date=30 June 2023}}</ref>

Concerns about contemporary forms of payola in the US prompted an investigation during which the [[FCC]] established firmly that the "loophole" was still a violation of the law. In 2007, four companies ([[CBS Radio]], [[Citadel Broadcasting Corporation|Citadel]], [[Clear Channel Communications|Clear Channel]], and [[Entercom]]) settled on paying $12.5 million in fines and accepting tougher restrictions for three years, although no company admitted any wrongdoing.<ref>{{cite news|title=FCC unveils settlement with radio firms |url=https://www.usatoday.com/money/economy/2007-04-13-2144814802_x.htm |first=John |last=Dunbar |newspaper=USA Today |date=13 April 2007 }}</ref> Due to increased legal scrutiny, some larger radio companies (including industry giant [[iHeartMedia, Inc.|Clear Channel]]) now refuse to have any contact with independent promoters.<ref>{{Cite web |last=Galston |first=Clara Hendrickson and William A. |date=2019-05-28 |title=Big tech threats: Making sense of the backlash against online platforms |url=https://www.brookings.edu/research/big-tech-threats-making-sense-of-the-backlash-against-online-platforms/ |access-date=2023-06-08 |website=Brookings |language=en-US}}</ref>

Clear Channel Radio, through [[iHeartRadio]], launched a program called ''On the Verge'' that required the stations to play a given song at least 150 times in order to give a new artist exposure. Brand managers at the top of the Clear Channel chain, after listening to hundreds of songs and filtering them down to about five or six favorites from various formats, send those selections to program directors across the country. These program directors vote on which ones they think radio listeners will like the most. Songs that benefited with the exposure were [[Iggy Azalea]]'s "Fancy", [[Tinashe]]'s "2 On", [[Tony Lewis (musician)|Anthony Lewis]]' "Candy Rain", and [[Jhené Aiko]]'s "The Worst". Tom Poleman, president of national programming platforms for the company, stated that the acts selected are based solely on the quality of their music and not on label pressure.<ref>{{cite web|url=http://rollingout.com/entertainment/radio-stations-forced-play-iggy-azaleas-fancy-least-150-times/|title=Why radio stations were forced to play Iggy Azalea's 'Fancy' at least 150 times|author=TJ Armour|date=20 July 2014|website=Rolling Out|access-date=30 November 2016}}</ref><ref>{{Cite news |url=https://www.washingtonpost.com/news/arts-and-entertainment/wp/2014/07/15/clear-channels-on-the-verge-program-helped-make-iggy-azalea-a-star-heres-how-it-works/ |title=Clear Channel's 'On the Verge' program helped make Iggy Azalea a star. Here's how it works |newspaper=The Washington Post}}</ref>{{relevance inline|date=February 2021|What does this have to do with payola, let alone the third-party loophole?}}

On Spotify, labels can pay for tracks to appear in user play-lists as "Sponsored Songs". It is possible for users to opt out of this in their account settings.<ref>{{cite web|url=https://techcrunch.com/2017/06/19/spotify-sponsored-content/|title=Spotify 'Sponsored Songs' lets labels pay for plays|first=Josh|last=Constine|website=Techcrunch.com|date=19 June 2017 }}</ref><ref>{{cite web|url=https://www.theverge.com/2017/6/19/15833880/spotify-sponsored-songs-playlists-test|title=Spotify is testing 'Sponsored Songs' in playlists|website=The Verge|date=19 June 2017}}</ref>

===As money laundering scheme===
In Mexico, South America, and some regions along the U.S. southern border, payola is used to [[launder money]] from illegal operations. In this practice, unknown "new artists" will suddenly appear on multiple formats and be aggressively promoted by producers of dubious origin, then disappear from the music scene or change their stage name.<ref>{{Cite web |url=http://www.zetatijuana.com/html/Edicion1888/Espectaculoz_Principal.html |title=La tarifa de la popularidad |author=Roberto A. Partida Sandoval |work=Zeta |location=Tijuana |access-date=4 April 2014 |archive-url=https://web.archive.org/web/20140407090431/http://www.zetatijuana.com/html/Edicion1888/Espectaculoz_Principal.html |archive-date=7 April 2014 |url-status=dead }}</ref><ref>{{cite web|url=http://www.jornada.unam.mx/2003/01/18/06an1esp.php|title=Perdurarán los narcocorridos, pues la gente los busca: Teodoro Bello |author=Arturo Cruz Barcenas|website=La Jornada |access-date=30 November 2016}}</ref>