Pay for Play Radio Probe Heats Up

April 20, 2006 — -- The Federal Communications Commission has stepped up the pressure on four of the nation's largest radio station operators by sending formal letters of inquiry to Clear Channel, CBS, Entercom and Citadel asking for information that could show whether the radio companies received any consideration in exchange for playing songs.

"The formal phase of inquiry has begun," FCC Commissioner Jonathan Adelstein told ABC News. "We had asked for some records in the past, and now we are asking for more. We are also giving the radio companies a chance to respond to specific allegations against them."

The letters of inquiry sent yesterday and first reported by the Los Angeles Times are the latest step in an FCC probe that has become increasingly aggressive since February 9, when ABC News first reported that the four conglomerates were under investigation for allegedly receiving money, gifts and other compensation in exchange for increasing the number of times certain record company's artists' songs were played.

In part, the FCC's letters of inquiry are intended to get the radio station owners to increase their offers, two FCC sources told ABC News. In the case of Citadel, the company's June acquisition of more than $2 billion in radio assets from ABC could be delayed if a settlement is not reached. A March petition filed with the FCC by Citadel competitor Red Wolf accused the company of illegal and unethical business practices, including payola. A failure to quickly resolve that FCC matter could also affect the deal.

ABC declined to comment.

The letters from the FCC put the full force of Chairman Kevin Martin behind the probe. Several of his commissioners and his enforcement division have strongly urged him to take this tough stance.

The letters came after settlement talks with the companies stalled after the FCC rejected their offers to pay relatively small fines. Asked if the formal investigation meant settlement talks were over, Adelstein said no.

"Just because we are investigating does not mean we can't continue settlement talks, assuming they make meaningful offers."