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Payola Called Fixture In Latin Music, A Different Road For English-Language Radio

Payola Called Fixture In Latin Music


December 8, 2002
Copyright © 2002 The Miami Herald. All rights reserved.

Edgar Alvarez quit being a promoter in Spanish-language radio two years ago. But on this afternoon, he is making some calls from the South Miami offices of his recently opened talent agency to show how his former business works.

First he calls a DJ at an Orlando station, telling her he has to get a song on the air. ''C'mon, Mami, tell me how much, I really need this song,'' he coaxes. ''Three thousand,'' she answers, her voice thin through the tiny speaker of Alvarez's cellphone.

The next call is to a promoter from Alvarez's native Puerto Rico. ''I'm doing a budget for three songs I have to break in Puerto Rico,'' Alvarez says. ''Uh-huh,'' an eager male voice replies. ''How much? Give me a total,'' Alvarez continues. ''Ten thousand,'' comes the answer. ''Cash?'' Alvarez asks. ``Yes, yes.''

''But Papi, c'mon, how many stations?'' Seven, the voice replies, ticking off prices for FM stations on the island: $3,500 for one, $1,100 for another, $500 for a third. Alvarez curses under his breath as he hangs up. ''Five hundred is way too little -- you know he's just keeping that for himself,'' he says.

Alvarez's exchange is just one example of how payola -- the illegal practice of paying radio stations to play songs without disclosing the arrangement to listeners -- riddles the fiercely competitive world of Spanish-language radio, where artists' careers and the fate of major record companies depend largely on what songs make it onto the airwaves.

Alvarez says it finally drove him out of the business -- in frustration at having doors slammed shut to music that wasn't accompanied by money, and at being a small fish among major-label sharks with bigger budgets and better access.

''Promoters get to the point where they either play the game or they're out,'' Alvarez said. ``There's this little group of promoters that have control, so everybody has to go through them, and that's why it starts to get more expensive for the labels.

``There's tons of cash that flows, and you don't know where it goes. The labels are not signing new artists because they don't know what will happen to them. The new talent is getting nowhere.''

A yearlong Herald investigation found that many in Latin music -- from independent-label heads and promoters to DJs and artists to current and former employees of major labels -- share Alvarez's frustration. They say payola limits the music that reaches the public and distorts the industry.

It has been an issue since the late 1950s, when scandals and investigations led to current laws. But in Latin music, federal prosecutors say, the practice has become pervasive.

Because payola adds so much to the cost of promoting a recording -- between 20 percent and 30 percent, according to former major-label employees -- it cuts out most smaller, independent labels, typical sources for new genres and artists.

Take Manny Contreras, a real-estate businessman who launched tiny NPE Discos in 1997. Contreras, a music-lover who got a taste of the industry by producing concerts, was excited about launching a business venture and new artists.

But he soon learned that getting his recordings on the radio was far more difficult and expensive than he thought.

''I paid in a very limited way, so that's what I got -- limited airtime,'' he said. ``I remember paying like $2,000 a month for one artist, and that was just for airplay eight times. I did that many times.''

Contreras said the airwaves seemed more open to those with cash and connections. As a small newcomer, he scrambled around the edges -- paying a DJ at a New York station to play his recording once a week, flipping the directors of tiny AM stations a few hundred each.

Sitting in the Newark, N.J., office of his closed label, Contreras says he had no choice.

''I didn't like it,'' he said. ``It's illegal. But there is no other way to market the music. Radio is the only channel.''


System of payments produces artistic and financial costs

The channel is being narrowed by payola even as the growing Hispanic population and the crossover success of artists such as Shakira and Marc Anthony leave Latin music poised to gain a wider audience.

''There's so much great stuff out there, but it's not even in the same building as the stuff that's on the radio,'' said Elsten Torres, a songwriter with Warner Chappell Music Publishing. ``It's hurting the industry, and it's hurting the music.''

The Latin music market, battling rampant piracy as well as a sales slump, can ill afford the artistic and financial costs of payola. U.S. shipments of Latin CDs were down 26 percent in the first half of this year, according to the Recording Industry Association of America.

Record companies use a variety of legitimate tactics to persuade radio stations to play their songs. But Jesus Lopez, chairman of Universal Music Latin America, one of the five major labels, says payola involves too many business and legal risks for his company to engage in it.

''This could kill the record industry,'' he said. ``If you're doing that, it's because you want to. Because if you pay, then you have to pay for everything you release.

``If I get a No. 1 song with bad music and people don't buy it, then I've got a problem. There's a lot of people who are out of the business, because they play this game, and this game hurts you.''

Executives at the Latin divisions of Sony Music, BMG and Warner Music declined to comment. The president of EMI Latin could not be reached for comment.

Latin radio executives said payola is not an issue in their business.

''I have no knowledge that payola is pervasive in Spanish-language radio,'' said Don Davis, vice president of programming for Chicago-based Hispanic Broadcasting Corp., the nation's largest Spanish-language radio chain, with 55 stations. ``That's not the way I think we do business.''

Jason Shrinsky, attorney for Spanish Broadcasting Systems, which with 25 stations is the nation's second-largest Latin radio company, said payola does not affect his company. ``We have very strict policies on that. Disc jockeys sign affidavits on a regular basis affirming they don't do that.''

Shrinsky attributed payola allegations to unsuccessful record labels and promoters frustrated with radio. ''It's always sour grapes in this business,'' he said. ``They won't play my record, so I had to pay them.''

He emphasized that it's those who offer payola who initiate the illegal act. ``It takes two people to make a bribe.

``Identify the people who are making the payment. I'd like to . . . march them down to the U.S. district attorney's office and prosecute them.''

Dozens of people at all levels of the Latin music industry call payola an open secret. But few are willing to blow the whistle, fearing not only legal consequences such as fines and jail time, but being blacklisted by radio programmers, distributors and all of the other interconnected parts of the industry.

''If you go against them, they're going to cut you off. You won't get anything played,'' said William Otero, a New York DJ who publishes the music magazine Latinos Unidos. 'The only way something like that would work is if all the record labels would stand up and say, `No, we're not going to pay anymore.' But there's too much competition.''


President of one label reportedly wouldn't go along

According to major-label sources, the head of one of the five major labels tried to get his counterparts to boycott payola two years ago. The effort failed when one label president refused. ''They all had to go with the flow, or it would have been just [one label] on the air,'' one source said.

In 1999, a federal investigation showed that Mexican regional label Fonovisa paid more than $1 million to radio program directors to play its artists, half of whom plummeted from the Billboard charts when the payola stopped. Richard Robinson, the assistant U.S. attorney in Los Angeles who co-prosecuted the Fonovisa case, said an investigation into the practice across the Latin music industry is still active, although no more indictments have been issued.

Otero and others in Latin music say that growing pressures on labels to show returns, combined with shrinking slots on Spanish-language radio, make the fight for airplay so fierce that record companies have come to accept payola as a necessary part of doing business.

''I hear all the time from record executives that they need to apply [payola] in this market,'' said Kike Posada, who produces a Latin rock show on Miami's WWFE-AM (670).

Said one former major-label employee: ``It's like the OK Corral -- you're trying to get on top of the other companies, and you're offering whatever it takes to get on.''

Those unwilling or unable to pay are often those who offer new and innovative music. Two years ago, Dan Storper, president of independent label Putumayo World Music, made a short-lived bid to enter the commercial Latin market. Storper was particularly hopeful that one tropical artist, already successful in clubs and noncommercial radio, would appeal to a general audience if he could get airplay.

After a legitimate radio campaign failed to garner results, Storper talked with a top independent promoter, who told him that airplay would cost a minimum of $50,000 -- Putumayo's entire promotional budget for the artist.

''He said this is the deal if you want to go for it, and these are the key stations. . . . It was different fees for amount of times per day or month,'' Storper said, adding that the promoter quoted costs of $5,000 a month for airplay on leading stations in Puerto Rico, New York and Miami.

He said he opted not to pay. Payola ''exists throughout commercial radio,'' he said. ``But it's more overt in the Latin world.''

Multiply Storper's experience by the approximately 15 key stations in big Hispanic markets such as New York, Miami, Los Angeles and Chicago that are needed to send a song up the Billboard charts, and the cost of a hit eludes all but the biggest companies.

''The smaller labels feel they don't have a chance because of the relationships the bigger labels have [with radio],'' said Nelson Rodriguez, former head of promotion for RMM, a top independent label in the 1990s, which was distributed by Sony. (RMM filed for bankruptcy in 2000.) 'I had program directors telling me, `You're involved with Sony, you got money, tell [RMM President] Ralph Mercado to pay.' ''

''You don't pay, you don't play,'' said Ruben Estrada, former vice president of government affairs for SBS, which owns WSKQ-FM (97.9) ''La Mega,'' New York's leading Latin music station.

Estrada, who worked at La Mega from 1992 to 2000, said there is ''no question'' that payola affected programming there.

''I have never picked up an envelope,'' Estrada said, ``but there are some individuals in SBS that do accept it.''

Shrinsky denied that anyone at SBS took payola. ''I think that's false. I don't have any information on that,'' he said. ``If [staff members] accept the money, they should be dismissed.''

New York promoters Jerroy Germaine and Ellis Noble say that last fall they paid La Mega promotions director Luis Lopez $2,000 to ensure that ads for a concert they were producing would be aired on top shows.

''He told me I had to give him $4,000 to make my event a hit,'' said Germaine, who said Lopez promised that La Mega would promote the show, which took place at Club Palladium in New Rochelle last November and included well-known artists Huey Dunbar and La India.

The pair say they drove to La Mega's Manhattan offices to give Lopez the first payment of $2,000. ''[Lopez] came outside and sat in the car and put it in his pocket,'' Germaine said. ''I was in the car. I saw it,'' Noble said. The money ``came from my pockets.''

Lopez, who could not be reached for comment, told the Spanish-language newspaper El Diario/La Prensa last winter that he did not take the money. He no longer works at La Mega.

Shrinsky said company policy prohibits him from discussing why Lopez was dismissed, and referred questions about the incident to Carey Davis, La Mega's general manager. Davis did not return repeated calls for comment.

Germaine and Noble said they believed that payola was common at La Mega.

'We had some of the artists' managers telling us you got to pay people off to get services,'' Noble said. ``You have a lot of people inside [La Mega] who are very corrupt.''

''Right now,'' said Germaine, ``these artists are scared because La Mega is the only source for them to get their records played in New York.

``You have major superstars who are so afraid their records would not get played by them talking. Because it is not just La Mega. It is all the stations in the Latin community. The Latin community is scared, and so they continue to get ripped off.''


Two chains control most of Latin music stations

Radio's importance has swelled as the Latin music business has grown and adopted mainstream business practices, which can clash with the older methods and particular needs of a Latin market that is still less developed and more dependent on radio than the mainstream.

Spanish-language radio has consolidated along with its English-language counterpart. The top two chains -- SBS, which counts Miami's WXDJ-FM (95.7) ''El Zol'' among its stations, and HBC, which owns Miami's WAMR-FM (107.5) ''Amor'' -- control virtually all of the important Latin music stations.

Those companies have adopted the market-research-driven programming practices of mainstream radio. That is meant to reassure stockholders and retain listeners and advertisers for stations that can now cost hundreds of millions of dollars, but it has also reduced new music on the air to a handful of songs a month.

Those songs must fit one of the narrowly defined formats on the Latin dial: tropical, pop/ballad and Mexican regional, as opposed to the wider range on English-language radio.

While the U.S. music market has other avenues -- the college concert tour and alternative radio stations are two -- for introducing new music, the Latin industry still depends almost exclusively on the airwaves to reach a geographically scattered, culturally fragmented audience.

And the recording side is dominated by the Latin divisions of the major labels, under the same pressure as their U.S. counterparts to show high sales and chart figures.

Radio programmers say they must respond to research and listeners' tastes, not to labels' need to promote artists.

''I understand it's a symbiotic relationship'' between record companies and radio, said Leo Vela, program director for WRTO-FM (98.3) ''Salsa 98,'' an HBC station in Miami. ``But is it my job to make hits for mediocre artists? No. I don't know any other business where people blame their failures on another industry.''

Vela said he gives new artists and small labels a chance if research or other signs are positive. He put Micaela, by salsa group Sonora Carruseles, on WRTO after the 4-year-old song become a dance-club staple.

In the market research that largely determines programming, a new song gets a chance on the air and is then played in focus groups and surveys. Songs that get a positive response stay in rotation.

But even this process can be corrupted. Several music industry sources say that a key researcher in one Spanish-language radio company is being paid by some major labels to alter research results to favor those labels' artists.

Although a Justice Department source says its investigation indicates that payola in Latin music is pervasive, it is a difficult charge to prosecute. Payola itself is only a misdemeanor. Investigators can try to prove bribery, a felony, but it is difficult to trace cash transactions or cash income, and to prove intent. Few of those taking illegal payments reach the level of unreported income necessary to interest the Internal Revenue Service.

And a code of silence persists.

''What do I think about radio?'' one Latin music veteran said. ``I don't think.''

A Different Road For English-Language Radio


December 8, 2002
Copyright © 2002 The Miami Herald. All rights reserved.

Payola has a long history that is not limited to the Latin music world.

An investigation into corrupt DJs taking bribes in the late 1950s led Congress to pass payola laws, which ban direct pay-for-play arrangements not announced to listeners. The scandal erupted again in the '80s, when press reports and legal investigations exposed a system in which labels paid millions to powerful independent promoters who made illegal cash payments to radio.

In today's English-language radio, major labels get music to radio chains through large promotional firms, which have close, sometimes exclusive, relationships with major broadcasters. Labels pay the promotion firms, which in turn pay radio to maintain their position as middlemen. Radio companies maintain that the system discourages potential illegal payments to staff members while providing the company with legitimate income.

The process is legal, since labels do not pay radio directly, but an increasing number of people claim it amounts to on-the-books payola.

In June, Sen. Russell Feingold, R-Wis., introduced legislation that would prohibit any pay-for-play arrangements. And in May, the Recording Industry Association of America, which represents recording labels, joined 10 other artist and music groups to ask Congress and the Federal Communications Commission to investigate the practice.

Thus far, the Hispanic music industry has not adopted the mainstream promotional system. Don Davis, vice president of programming at Hispanic Broadcasting Corp., the nation's largest Latin radio chain, says HBC does not contract with promotional firms because HBC believes it gives them undue access to programmers.

Spanish Broadcasting Systems, the country's second-largest Spanish-language radio company, tried to institute such a system this year. The company contracted with Deborah Castillero, head of New Jersey-based promotion firm Maracas, giving her exclusive rights to promote Latin labels' records to certain SBS stations, with Maracas paying a portion of the fees it received to SBS.

Castillero says she was turned down by almost all of the labels she approached.

''They told me that kind of strategy wasn't going to work because they would have to pay [Maracas] and pay the program directors . . . pay double,'' Castillero said.

A source at one label confirmed that the company had turned her down because it did not want to pay twice for airplay.

SBS attorney Jason Shrinsky said Castillero's contract was terminated because she promoted an artist she was managing to some SBS stations, which was against company policy.

Castillero said her contract would have ended regardless because the scheme was unsuccessful. She complained that industry players were either unwilling or afraid to discard the current system.

''There's no interest to change the way the Latin music industry functions,'' she said. ``Until a new regime comes in, things will continue to work by illegitimate business practices.''

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