Pay to Play

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By George Howard

Below is a case study focusing on Payola. In case you’re not familiar with the term, “Payola” is the practice of exchanging money (or some other item of value) for radio play of a song.  The practice is illegal under U.S. Law (47 U.S.C. § 317).  Payola—in one form or another—has been going on since pretty much the dawn of radio, and continues to this day. I wrote about this at length in a much-discussed article on the TuneCore blog.

Arguments vary over whether or not payola should be illegal, or whether or not payola is good or bad for the business/artist.  But what is undeniably true, is that lack of transparency in any business is correlated to unethical activity.

The question explored in the case, however, presents the competing forces that those in the music business frequently face: (A) adhere to your core values, and run the risk of reducing your chances of success; or (B) abandon values/ethics, and do whatever it takes to make it.

I very much look forward to your comments on what you would do if faced with the situation described in the case study…


Your New Record Label

You are a young music executive who after years of successfully running smaller divisions has recently been put in charge of a large record label.  This label has recently gone through some changes in ownership, and is now owned by a parent company that is in part owned and financed by a major investment bank.

As president of this label you maintain a degree of autonomy from your corporate parent, but, because they provide funding, you are in fact closely tied to them.  Your label employs approximately 40 full-time employees, and has an artist roster of about 15 active artists (i.e. artists who are touring and releasing records every year or so), and another approximately 300 catalog titles (records that are distributed to stores but not heavily promoted).

The label has been in existence for nearly 20 years, and has carved a niche for itself by acquiring and exploiting these catalog titles.  In fact, the active artists are, in some ways, kept on the label to bolster catalog sales.  This strategy is in alignment with the industry reality that very few new (i.e. active) artists make money for record labels.  In other words, the record label never recoups the costs invested in these artists.

While this strategy keeps the label from being viewed as a “sexy” type of entity in comparison to other labels that concentrate on breaking new artists, it has allowed the label to stay in business far longer than many of its competitors. Additionally, this business strategy offers a degree of security for the label’s employees, as well as the artists and estates who entrust their records to the label.

Adding a New Artist

The new corporate owners of the label have recently begun (strongly) suggesting that the label should sign some more current acts, specifically one artist who would be just the type of marquee name that would energize the label from both a reputation standpoint and a financial one.

As president of the label, one of your principle duties is A&R (artist & repertoire); it is your job to find and sign the talent for the label.  Given the mandate from your corporate parent to sign this marquee artist, it is your job to do so.  During numerous meetings with the artist and her manager, you find that this artist had a very successful career as a major label artist.  She holds the record for longest-charting song on an important radio chart. Her three albums have sold roughly 700,000 copies each.  Her videos had been aired frequently on both MTV and VH1.

All of this success, however, occurred five years ago or longer.  In the ensuing five years, she primarily fought with her label over creative issues, and, ultimately, both the artist and the label agreed to part ways.  What this artist wants now, more than anything else, is creative control, and she is willing to forgo the big budgets offered by major labels in order to make the type of records she wants.

You explain to her that artistic freedom is the philosophy of the label.  You also tell her that even with her reduced expectations, by virtue of her past successes and the pressures being put on you by your corporate parents, that this is a big risk for the label, and one that will involve a budget several times higher than those for other active artists signed to the label.  The vast majority of this budget will go towards attempting to capitalize on her past successes at radio.

Needed: Radio Play

While your label has consciously never attempted to break an artist at commercial radio, you are well aware that the costs of attempting to break an album at radio are so high that the risks typically outweigh the rewards for a label of this size.  For this marquee artist, however, there simply is no other way to achieve even a fraction of the sales she garnered for her prior records without radio.  In fact, radio play is the only way the vast majority of her fans will know she has a new record out.

Assurances are, therefore, made by the artist that she will deliver a track suitable for radio, and the label, in turn, promises to invest the money and human resources required to try and achieve significant radio airplay.  The deal is made.  A sizable (relative to your label’s history) advance is paid to the artist, and a massive budget is allocated for radio play.  This artist is the label’s new number one priority.

As president of the label you must get the staff excited and motivated to work on this new artist’s behalf.  Though a difficult task, it is made somewhat easier by the fact that the employees soon realize that their livelihood is potentially dependent on the success of this one artist.

While your employees are feeling the pressure from you, you, in turn, are feeling the pressure from your corporate parent, as they have grown increasingly concerned with the flow of money being invested…and the radio campaign has not even begun.  You begin hiring radio consultants to help devise the plan that will make or break the record.

The Plan

As the radio team begins to take shape, so too does the strategy.  A prominent jean manufacturer has agreed to give away hundreds of jeans to radio stations who will use them for contests in exchange for your marquee artist appearing in their ads.  This artist will appear at dozens of radio station events (all travel picked up by the label).  There will be various subtle remixes of the single (the song that is pulled from the album to go to radio), so that stations can have the one that works best for them (again the label picks up the tab).

A video will be made, in part to send directly to stations so that they may have a visual image of the song, but also because radio stations want to know, that should a record begin getting airplay, that a video will be available to be aired and thus drive even more demand for airplay (the label pays for a video).  The label’s sales staff pushes as many records into the marketplace as possible in order to assure the radio stations that when they play the song their listeners will be able to find the record in stores (the cost of getting records into stores is huge, and, of course, the label pays for this).

You , as president of the label, approve all of these expenses, and explain/justify them to your corporate parents.  While the dollar figures are exponentially larger for this artist, these costs and this plan is not radically different from ones you’ve approved in the past.  You feel like you are properly setting the record up.

As the date to bring the record to radio and attempt to get the song “added” to the stations’ playlists approaches, you begin another of  your scheduled conference calls with the rest of the radio team.  This team is comprised of the members of your radio staff, who are employees of the label, as well as five or six consultants hired by the label who have relationships and expertise in the radio format(s) which you are trying to reach.

Right or Wrong?

After dialing into the conference you realize that it is only you and the head consultant on the phone.  The head consultant states that the radio campaign is at the make-or-break stage. That while some stations are reacting well to the sound of the song and the other promotional activity taking place, sufficient numbers of stations are not reacting strongly enough to cause the record to succeed in a major way; i.e. succeed in a manner that would result in airplay and thus sales that would recoup some of your investment, and allow the artist to succeed.

You listen attentively, and ask what can be done.  She states that certain stations need a push.  A monetary push.  Very quickly she gives you an address (no name), and tells you to send twenty-five American Express gift checks in $10,000 intervals to this address.  As you don’t say anything, she continues.  She tells you that these gift checks will be used to push those stations that are on the edge, over—so they will begin playing the record.  She tells you that this is done all the time, and that because they’re AmEx gift checks, they’re untraceable.  You tell her that you’ll get back to her and hang up the phone.

You are now faced with a decision.  You know that payola (the act of paying for a song to be played on the radio) is illegal.  You also know that not only have your corporate parents mandated that this record be a success, but that many of your employees have mortgages and kids, and that the success or failure of this record will determine whether or not you will be able to continue paying them.  Last, but not least, you’ve promised the artist that you would do all that you could to make the record a success, and thus revitalize her career.  Making the record a success is certainly contingent upon the song being played on the radio.

What are your ethical obligations in this situation? What do you do?


George Howard is the COO of Concert Vault, Daytrotter, and Paste Magazine. Mr. Howard is an Associate Professor of Management at Berklee College of Music. Follow George on Twitter.

  • http://www.facebook.com/karleigh16 Karleigh Harris

    Wow… This is a great scenario, and a common one I’m sure. Personally, if it were me making the decision I would not use illegal methods to gain exposure for my artist. People tend to allow themselves to compromise their morals r beliefs to take the easy way out of a difficult situation. Payola is a perfect example because, from the radio perspective, they want you to believe that this is the only way to break your artist. It’s in their best interest to create payola as a quiet but pervasive industry standard because, to put it simply, they’re getting PAID. But this can only be allowed and maintained as the status quo as long as there are people who are too lazy/not innovative enough to think outside the speaker-box, if you will. This is the era of the internet, radio is a dying format anyway, so why not focus extra attention and resources on internet radio, social media, viral video, other forms of online marketing? These are all legal, relatively less expensive, and effective ways to achieve the same result. And once the song takes off, the radio will be forced to follow suit. If we are going to make any changes, we need leadership in the boardroom as well as creativity the vocal booth. We need to reward the artist and execs who aren’t willing to compromise their integrity to make a quick buck! It’s gotta start somewhere……

  • MikeCorcoran

    hmmmm…….courtney love, virgin records?…that’s my guess ; )

    wow….250,000k for just the payola portion of radio promo these days? damn, prices sure went up around here..; )

    Ok, all seriousness – as CEO I would put the same 250k into more creative internet marketing, rather than throwing it all at the tried-and-true-but-dirty-business-as-usual payola scheme.

    First, there’s no guarantee 250k (25 pymnts@10k) would break the album and allow you to recoup, regardless of this artist’s past success. FM radio just doesn’t have the same power & influence it had 15 years ago, or even 5 years ago.

    Second, (and I know there’s no guarantees elsewhere) but you can get better mileage using 250K (or much less) hammering away on internet blogs, facebook & twitter campaigns, pandora ads, itunes frontpage publicity, college radio, basement DJs, tv/film placements, beverage tie-ins, merch deals, spotify ads, and other guerilla tactics and have a better chance of creating the splash necessary to get your artist out in front of the fray.

    Third, going down the road of payola will leave you exposed to the same, giant scandals in the radio/record industry that occurs every 5-10 years and always results in your label’s parent company settling for multi-million$ fines and chopping off their subsidiary labels heads (including yours).

    • MikeCorcoran

      (one last thing i forgot to say) ….so don’t do it!

  • EES

    TOTALLY AGREE with Mike Corcoran!!!

  • http://www.facebook.com/hras.smith H Ras Smith

    I will not use illegal methods to gain exposure for my artist…period!!

  • http://cdmusicmastering.com/ CD Mastering

    That’s the way the music business has worked since it started 100 years ago! It’s like drinking and driving. That’s illegal too, but 300 million people in this world do it every day!!

  • Stuart Smith

    I would hold a press conference and expose the offending record companies. The resulting outcry in the press would get you more publicity for your artist than you could even dream of.

  • Tormy Can Cool

    This scenario is not new, and in Europe is also an issue. I have not clue if it’s here legal or not. But it’s so. What to do?
    You are just trapped into the “music mafia” and if you don’t like, it’s useless to rise the voice and to denounce here and there, because: if ever a procedure begins, you loose anyhow. Once you try to “take away the food” of the dragon, he “will eat you”

    If you are a president of a Label and you don’t put into consideration the “payola” upfront any promotion, then you should resign.

    Unfortunately there’s no way to stop it, thus when you ask for budget, being the promotion/marketing fundamental for the success of the product, you need to put the “payola” on the plate.

    the massive investment on just internet promotions somebody here ingenuously suggested (don’t be offended for that) it’s just a mere hearsay.

    No one becomes famous with internet stuff. no listener will click on any publicity because people have enough to see publicity everywhere. thus they will not click on it unless for error. Less person will start to listen to the piece, less will go till the end of it.

    the only one way is to push (to impose) the product in a way that people “cannot refuse”: broadcast it via radio.

    People is listening to the radio, passively. it means: just to have some kind of “empty coverage”. Thus whatever you put, they will listen to it. If they don’t like, just the listen to it till the end, perhaps to tear into it. But then they listen to it many times and just start to be “good” to their hears … that’s the way in which certain musical shit of now-a-days is transformed in success.

    Considering that when you are president of a lable, you are in a dirty world, you have to deal with. your responsibility is much higher than to respect a law (which no one respects and whenever it happens: several persons loose their jobs!!).

    Having this amount of responsibility and not to fail: pay the payola and shut up. Till somebody at higher level (Parliament, Senate etc which are not certainly cleaner than you as president of a label which is in a shity world), will create some other law which permits more transparency and brakes the “payola” forever.

  • Chris

    Well this is something I am currently being faced with. The amount is not 250, its 100k.

    Now here is the issue I see with this. Just like this post states I was I assured by numerous people that to make a dent in the industry, radio is the only way,To the radio people money talks and If the music is good or not, DOESN’T MATTER. This is a business. And by the way, we have a line of people behind you that are willing to pay, so pay up, or don’t waste my time.
    Needless to say this pissed me off. but lets look at the facts.
    This post talks about CD sales being expected by the label. Well….. They will never recoup, and people DON’T BUY CD’s like they used to. In fact they only way to make money is from performances and sponsorship. And the easiest fastest way to get both, is by getting massive exposure. Here is the Key “EXPOSURE TO MASS AMOUNTS OF PEOPLE” and radio claims they can provide that, does it always work. NO!
    Not to mention you send the money, and have no assurances they will actually play you since the whole thing is illegal in the first place,

    So you are selling a product, that 90% of people download for free, AND they are likely to buy ONLY the single you are pushing, which is going to be less than a dollar per song sold. Plus on top of that, streaming services pay so little you have to get 200 streams to earn the equivalent of 1 download, in terms of revenue.

    Concerts and concert venues, are increasingly harder to fill and people may not be willing to pay too much for a new artist, unless of course they are massively popular and on the radio and Mass media all the time, AND EVEN THEN…. Its very very tough.

    Securing sponsorship’s can be a challenge, but if you tell a sponsor you are getting massive radio play they are much more willing to support you. Again, this is easier said than done

    So, what would I do in this case. Simple, Do a lot of internet marketing, as cheeply as possible, maybe target 1 or 2 small markets and see the reaction of the people. If it looks promising and they are playing the records, invest in more markets, if it doesn’t, Focus on Guerilla marketing, and free things like social media.

    So I guess I would pay if I had the money, But guess what I DON’T, and neither do most up and coming artists. I toured with the biggest artist in my genre, he offered to sign me to his label, IF I PAYED HIM!!! JAJAJAJAJA. This industry or whatever you want to call it nowadays Its sad. But hey. I’ll do internet stuff, and hope something good comes out of it, Ill continue touring with major acts, and who knows. But the odds of massive success now days, often require massive investment, which is hard to find, because you can’t guarantee a return.

  • Kris Pierce

    I’m surprised at the irony here. While the numbers are very different, the spirit of the Internet radio station I was pointed to by Tunecore (Jango) is doing this very thing. 1. If commercials have to pay for airtime, why not your commercial? 2. Every artist thinks their song is the shit, and these DJ’s and music programmers now different. If your song is “the shit” they’re going to play it. See where I’m going? If you had to pay, it’s time to rewrite some songs. That being said, if Justin Bieber is offering a lot of money to the same radio station I’m trying to target, I don’t cry, bitch, or complain. I figure out how to do it. You can talk all day about if it’s right or not. While you’re thinking about it I’m in the radio station talking myself into an interview. Don’t let thinking and pontificating get in the way of getting the job done.

  • Philip

    I would not feed into the payola hipocrisy. “Would you sell drugs to feed your family?” is not a feasible option so to speak. If you to jail trying to do the right thing the wrong way you have only yourself to blame. I agree with the last comment. I would find a way to take advantage of other, probably more effective avenues of advertisement.

  • Ross Stagg

    If radio were all over this record there would be no need for bribery especially as the artist has a strong track record. Sounds like its time to record a BETTER cut! Put the dough into that!

  • http://www.dccardwell.com/ DC Cardwell

    Interesting scenario, presuming that it does actually reveal the kind of things that go on at this level – and I suspect it’s a pretty accurate portrayal as George Howard is a smart guy.

    I notice, though, that he left out one thing – the question of whether the single is any good or not.

    And we’re not told if the artist wants her fans to be the kind of people who are swayed by airplay on the kind of radios stations who operate in this manner.

    But overall, I also agree that Mike Corcoran’s answer is pretty astute given the changes taking place in the industry these days and the kind of label this is supposed to be. Although Mike’s ideas are more likely to lead to genuine success (true fans), rather than an appearance of success (celebrity and money).

    ~ DC

  • Style-City Music

    Hmmm, I have just the opposite problem, I am on the other side of the fence, I have a very popular music video program that has aired on over 150 TV stations, I don’t have sponsors, I don’t have commercials, I don’t get paid by the stations, I make no money at all for what I do, yet I receive over 30 submissions a week from record labels, and independent artists wanting to get their music video on my show. all the money invested into the show and costs has come out of my own pockets, yet thousands of artists benefit from television exposure generated by my hard work and effort.

    If I charged 25-30 dollars a submission like other shows I would be able to at least eat, but the most I can hope for now as an independent is that my show becomes popular enough for a network to want to syndicate my show and pay me a million or two for becoming syndicated.

    In the meantime I have to fight and scrape everyday to keep my show on the air.

  • Ravishing Rebecca

    I don’t see why the money couldn’t be used legitimately in conjunction with the advertising and promotion. Not everyone has to add the song, and it’s only good business sense to give the advertising money to a “friendly” station. It’s common knowledge that with media (radio included) being so fragmented, a funded broadcast of this nature isn’t even necessary, and the entire concept outmoded.

  • invisipics

    First let me say that any article that gets us artists to put ourselves in the place of another player in the industry for five minutes can’t be a bad thing. So congratulations on the strategy.

    I’m very grateful not to be in that executive’s position. Given the case study as it stands, the guy’s in a tight spot. My personal strategy would have been to put a very high priority on communicating with the parent company and making sure that the pushers were fully aware of the risks of the situation from the start and as it developed. As you present the case, the executive doesn’t appear to have the balls to say anything except, ‘Yes, Sir.’ But with a few genuine communication skills, I think this impasse might have been avoided quite a while before getting there.

    But, of course, it’s easy to say from the comfort of my armchair…..

    Whatever the state of your moral fibre, I wish you all the best for Christmas and the New Year.

  • http://www.facebook.com/dino.lee.129142 Dino Lee

    Why did the author leave out ‘Buy Backs’? That is more egregious than payola and part of the same strategy. A record label takes the $250,000, and purchases copies of their artist’s new record (buys back) to get good placement on billboard charts; Promoting sales and radio AirPlay.
    This is definitely more fraudulent and very prevalent in today’s world of socially engineered, mediocre “music”.

  • http://www.facebook.com/dino.lee.129142 Dino Lee

    Let’s not forget the journalists. They’ve seen their share of payola for reviews that are favorable to the artist. There are many pockets to fill in the music business.

  • http://www.facebook.com/soaringsongbird Normandie Wilson

    Wow. Well, with $250k in payouts, I guess this answers my question about my own songs and their popularity/exposure. I have no idea what I’d do in this situation, but thanks for writing this article to let us have some ideas about what the real situation is. Pay to play is everywhere and I don’t see it going away anytime soon. It answers a lot of questions for me.

  • Eduardo Cisneros

    Creo que los grandes Sellos Discograficos continuan realizando estos procedimientos de PAYOLA ya que estan escasos de talento dentro de sus oficinas y prefieren seguir invirtiendo asi apra llegar a sus objetivos perjudicando a las Label Independientes, ellos no se dan cuenta que Tienen el poder para poner a la RADIO contra la pared ya que al prohibirles la reproduccion de su musica las radios no tendrian pautas comerciales ya que ellos venden la pautas comerciales por el contenido que tienen en la RADIO , no es que no se den cuenta es que estos es una Mafia y tenemos que sacrificar el Talento por lo comercial y a su vez , los pequeños label tenemos que jugar este juego para poder exibir nuestra musica al publico consumidor.

  • Gothic Jazz

    Radio stations should play the game and support new music they play old favourites in most cases and this does not bode well for a healthy music industry which should be made a definite mandatory consideration in the rules of the game when licensing a new radio station by the authorities.

  • JOB MUSIC

    I know “payola” is illegal. However, I also know, that there’re Big Labels that buy time on some radio stations and they use that time to play only their products. Isn’t that a violation of the law?