Tycoons Row

Payola is when large record companies pay for the broadcast of records on music radio. It’s a U.S. law that radio stations, who accept money to play specific songs on the air, must disclose the song on the air as a paid sponsor.

This week, the FCC had a $12.5 million fine between major radio firms:

• CBS Radio
• Clear Channel Communications, INC
• Entercom Communications Corp
• Citadel Braodcasting Corp.

The settlement is said to include that the radio stations are to air 8400 segments of independent & local artists per year.

Disclosure is a big issue that will continue to creep up especially as social networking, user-generated content and technology adoption begins to grow. There were already issues sorrounding Pay-Per-Post and their issues with not disclosing when bloggers were being paid for writing unbiased articles. Now, it is creeping up again in the radio industry.

The concept of disclosure should be readily re-visisted, but it is a simple process. In user-generated content, I think any “transaction” that occurs between buyer/seller or sponsor/sponsoree should be disclosed. This is just mutual respect. However, affiliates or affiliated partnerships should not have to be disclosed. Reason being is that in most sponsorship, a transaction has already taken place. In affiliate partnerships, a an individual/business chooses to accept an affiliates in the hopes of a future transaction that may or may not take place.

So, for a company, small business or large, that hopes to have controls in place for their financial reporting, when receiving a sponsorhip, whether it be video, content, or audio, it’s best to recognize that revenue when the transaction has occurred by additionally acknowledging that sponsorship as a paid sponsor. Or else, talk to the FCC.