Dangers of Accepting Payola in the Media Industry

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With an uncertain economy and rapidly-changing technology, media companies have to get creative to meet their sales goals. That should never include accepting payola in order to close a deal. Set ethical standards so that when you're tempted with a shady offer, you'll know how to respond so that you can avoid the dangers of accepting payola in media.

What is Payola?

Payola is historically tied to the radio industry.

The term is commonly used when a record company would pay an announcer or a radio station to play its music.

The rules set by the Federal Communications Commission (FCC) don't forbid taking money to play a certain song. However, the FCC does require that an announcer or station disclose who paid for the material at the time it is aired.

So, a radio station can legally program some of its broadcast day with paid programming, just as a TV station would air an infomercial at 2 o'clock in the morning. You've probably seen a TV station air a disclosure such as, "the following program is a paid advertisement..." -- a radio station must do the same.

History of Payola

As rock and roll became an established radio format in the 1950s, it didn't take long for someone to recognize that millions could be made in record sales if a song got enough exposure on radio. A "hit" didn't have to be a brilliantly recorded tune, just one that was played over and over.

Money would guarantee the airtime on popular radio stations. That investment would pay for itself when giddy fans would swarm record stores looking to buy their new favorite song.

What had been a common practice turned into the payola scandal of 1959. That's when Congress got involved in cracking down on the practice.

Some DJs, like Dick Clark, cooperated with the government and went on to even greater fame, while others like Alan Freed, were indicted and never recovered.

How Payola Exists Today

In the 1950s, getting DJs to play certain music required a lot of legwork. You had to find a group of announcers at the most popular stations in major cities willing to participate.

Today, thanks to consolidation, there are fewer record labels and radio station owners. A few key players at a handful of companies can try to control the industry.

In 2005, then-New York Attorney General Eliot Spitzer launched a modern-era investigation into payola. That led to settlements with several well-known record labels, including Sony BMG Music Entertainment and Warner Music Group Corp.

Dubious Deals Beyond Radio

Other forms of media aren't immune to the temptation of making a fast buck, even though they don't involve classic cases of payola. In television, TV networks have long denied paying for interviews, yet during the Casey Anthony trial, court records showed ABC News once paid her $200,000 for photographs.

That's an example of the media company paying money, rather than being paid. But it's still a case of cash influencing content.

While $200,000 sounds like a lot of money, a highly-promoted news story that attracts top Nielsen ratings can earn millions.

Magazines and newspapers often carry inserts labeled "paid advertisements" for car companies or pharmaceuticals. But, if a hometown publication wanted to take cash to do a news story on a hospital's new surgical unit, it would be hard to track.

How to Set Ethical Standards

It's tough for a government agency or a team of prosecutors to expose payola and its various forms. The truth is, the vast majority of people and companies will never be caught.

Still, it's important to follow media ethics rules. That way, you and your company have your own set of standards to follow. If employees violate these internal policies, they can be fired regardless of whether there's an outside investigation.

Remember, accepting payment for promoting content is not against the law. Disclosure is what's key. If you feel unwilling to tell your audience that you took money, then your gut is probably telling you that there's something unethical about your deal.