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 or a lesser-known band of the label may gain air time.
Third-party loophole
A loophole in US 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.[21][22] As it was seen as falling outside the payola rules, stations did not deem it necessary to report to authorities.[citation needed] This practice became widespread until a 1986 NBC News investigation called "The New Payola" instigated another round of Congressional investigations.[23]
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.[24] 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 remains under investigation.[25][26][needs update]
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, 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.[27] Due to increased legal scrutiny, some larger radio companies (including industry giant Clear Channel) now refuse to have any contact with independent promoters.[citation needed]
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", 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.[28][29][relevant?]
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.[30][31]
As money laundering scheme
In Mexico, South America, and some regions along the US 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.[32][33]
https://en.wikipedia.org/wiki/Payola