America's record industry, still recovering from last summer's "porn rock" controversy, is being shaken anew by reports of federal grand jury investigations into possible "payola" scandals.
The immediate targets of the questioning are the independent promoters, who may free-lance for a number of major record labels or represent smaller independent labels. Their job is to get songs played on the country's 10,000 radio stations. The largest stations then report to trade magazines what they play, and that translates into popularity and financial success in the multibillion-dollar industry.
Already, Capitol Industries-EMI, MCA, Warner Communications and RCA have dropped their relationships with independent promoters, and Polygram, the CBS Records Group and other companies are keeping an eye on the developing investigations.
CBS spokesman Robert Altshuler said yesterday that CBS will make an announcement on whether it will retain its independent promoters "shortly . . . I expect an announcement this week."
Some promoters are protesting this indiscriminate branding of their profession.
"I'm devastated," said Jonas Cash, the main independent promoter in this area, representing all the major labels in Washington, Baltimore and Virginia. He said yesterday he has lost 80 percent of his clients in the last week, but continues to represent A&M, Motown and CBS, as well as many small labels.
"I've spent 27 years and I've built an excellent reputation," he said. "I've dealt in an honest way with everyone I've done business with. When something comes down like this and the people higher up make decisions, everyone gets burned. Hopefully this won't be permanent."
Yet some observers of the radio industry feel that a problem is really there.
"This makes Watergate look like a picnic," said Jim Carnegie, publisher of the Radio Business Report. "The payola scare has a way of attributing itself with the radio industry. But the primary area of concern is the handful of promotion people."
Despite the impact of MTV, radio exposure remains the single greatest promotional tool in terms of record sales. The term "payola," coined in the late 1950s, refers to payments made to broadcasters, program directors or disc jockeys -- most often on the influential Top 40 stations -- either to play specific records or simply to report that they were playing records that, in fact, they were not.
The focus of the current federal grand jury investigation in New York is the network of independent promoters, who receive up to $80 million a year from the major record companies, according to televised reports by NBC last week. There are unconfirmed reports in the industry that at least two other grand jury investigations are under way, possibly in Los Angeles and Washington.
The New York grand jury reputedly also is investigating ties between certain powerful independent promoters and alleged figures in organized crime, according to reports aired last week on "NBC Nightly News."
NBC also reported that some singles have been given promotional budgets as high as $150,000. In the 1984 House commitee investigation, it was reported that CBS had increased its budget for independent promotion from a few hundred thousand dollars in the mid-1970s to somewhere between $8 million and $10 million in 1983.
While much of this can be viewed as a legitimate business expense, the scandal is sparked by allegations that some of that money has been used by independent promoters to influence radio executives or program directors with cash, drugs, sexual favors, real estate and cars.
In Washington, local radio programmers said they believe their current safeguards against the practice of payola are working.
WWDC-FM, which adds about five new records a week to its play list, said it has several ways to protect against influences by promoters. The deejays are required to sign a statement every six months saying they have not taken money, and only the programming department decides what is played.
"Also, when we give away record albums, we send companies or promoters letters saying we are not being influenced. In the end there is no way to safeguard youself, but you have to know the people you are working for," said B.J. Cohen, assistant program director at WWDC, an album rock station. She said she has never been approached with any kind of payola.
At WRQX-FM, which is owned by Capital Cities/ABC Inc., all employes who deal with music, including deejays, sign a sworn statement once per quarter that they are not taking payola. The three executives who select the music to be played, according to Program Director Randy Lane, also justify to Cap Cities/ABC on a weekly basis why they select a record, and sign that report saying that they have not been influenced by promoters but have relied on their own research.
Lane said he did not think payola is a problem in Washington.
"I don't think it exists . . . There are four or five people who do that sort of thing scattered around the country. The stations that do that are not the successful stations," said Lane.
NBC Radio, which owns eight stations, including WKYS-FM here, also requires its personnel to sign sworn statements that they are not taking payola. In addition, explained Robert Mounty, executive vice president of NBC Radio: "None of the stations play brand-new releases. Once the music is established, there is very little incentive to participate in that. So if we saw someone playing a new song, we would want to know why."
Several years ago CBS Radio Network instituted a strict system of sworn statements, documentation of the stations' play lists and a biannual review of those policies with station personnel.
The reports of songs played that radio stations make to trade journals such as Billboard are important in generating airplay at other stations around the country. When a large number of reporting stations add a new record, it becomes a "breaker," which has the effect of lighting a fire under sales and furthering airplay.
These reporting practices also have been hotly discussed in the industry. Three years ago NBC Radio decided that none of its stations would report to the trade publications, thereby making them less susceptible to payola.
A spokeswoman for the Federal Communications Commission said the federal agency has "no jurisdiction in the area" of false reporting.
"That does not contravene any regulation we have," said Mary Catherine Kilday. "We have regulations that go to payola. I don't know what a court would say, but I'm saying that alleged practice is not violative of a commission regulation."
This is not the first time that payola scandals have rocked the industry. In 1960, such major radio personalities as Dick Clark and Alan Freed were called before a congressional hearing into allegations of payola, which was not illegal then. Clark emerged from the hearings with his reputation intact, after convincing investigators he had not been aware of any conflict. Freed, however, was fined and from then on was unable to find any substantial work. He died a few years later.
After the hearings, Congress passed a law making payola illegal.
The major difference between then and now, observed publisher Jim Carnegie, is that the power of song selection has been transferred from the deejay to the program and music directors.
"That makes it more difficult to get to the deejays," said Carnegie.
He said the influence is concentrated among a small group of station programmers at major stations whose choices greatly influence the smaller stations.
"A top-rated station says it's playing a particular artist or a new release," he said, "and all of a sudden maybe 100 stations" follow suit.
Since the '60s payola scandal, the FCC and other radio industry organizations have maintained files on charges of payola. In 1974 there was a stir about payola in the black-oriented radio business, resulting in some firings and tightening of promotional procedures.
In 1984, the House Subcommittee on Oversight and Investigation held preliminary hearings into allegations that payola once again was rampant. The committee reported that while there were "ample opportunities and incentives for improper or illegal activities," it had uncovered "no credible evidence or specific incidents," and recommended against a full investigation.
The National Association of Broadcasters, which represents most of the radio and television stations in the country, has had a long-stated policy of warning its members about the federal law regarding payola. Reflecting on the current controversy, Jeff Baumann, NAB general counsel, said, "I don't think we can do anything until we know what's going on."