The Great American Payola $candal Part 2 | 21
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In 1960, after months of testimony and investigation, it was made illegal for anyone to bribe a radio station or any of its employees to play a record. Paola was forbidden under punishment of jail time and a fine of up to $10,000. This, it was hoped, would keep the marketplace even and fair, and no one, not a label, not an artist, or anyone promoting that artist, would be able to jump the queue to get a record played on the radio ahead of anybody else.

Only songs with true merit would make it to the public. So, no more pay for play. Yeah, nice try. If one thing was learned from the great American payola scandal, it was that radio airplay was essential to making money from a record. And if promoters could no longer walk into a radio station with a bag of cash, a case of booze, some drugs, and a couple of hookers, or the promise of gifts, such as expensive watches or trips, then they needed to get creative.

There had to be less obvious ways of tipping the scales in their favor. And there were. After those initial hearings and the laws passed in their wake, payola never went away. Instead, it went underground, toughened up, and became even more sleazy. As the music industry got bigger and became more corporatized through the 1960s and 70s, the competition to get music on the radio got more intense. The amount of money to be made for music got exponentially larger.

And the whole situation got a lot more rough. By the time we got to the 1980s, payola had once again become a monster. And this time, people got hurt. I'm Alan Cross, and this is episode 21 of Uncharted, Crime and Mayhem in the Music Industry. And it's part two of our look at the great American payola scandal. And the stories just keep on coming. In 1986, I got a tour of a radio station in Miami, a place called I-95.

And along the way, I met Don Cox. He was the afternoon DJ. Very nice guy. He let me sit in on his show for an hour so I could see how everything operated. It was a good visit. About a month later, Cox appeared as part of an NBC News investigation into Paola, run by reporter Brian Ross. Cox spilled the beans on how the bribes came in. Drugs and money, mostly. He wasn't involved, but he knew people who were. ♪

Don Cox of Miami, one of the top disc jockeys in the country, says some promoters will do almost anything to get their records played and earn their big fees from the record companies. Well, do you know how much money you make on having a hit record in this country? Cox, who's had a drug problem, says he's had to turn away promoters who have offered him cash and cocaine. Here, take this ounce and go on home of cocaine. A couple thousand dollars. Here, you go take... You know, we can get more. You take this. And I'll give you a call Tuesday. And what happens Tuesday?

They call you and go, how was that? By the way, I got this record I want you to hear. Now, if you take it, you got to answer the phone. They cozy up and they corrupt. That's their job. 72 hours after that documentary aired, Cox was walking to his car after his shift when four big guys with sawed-off baseball bats, razor blades, and a gun came out of the shadows. One of them said, you shouldn't have had such a big mouth on TV.

Cox was badly beaten and ended up in the hospital for almost three weeks. Now, we don't know the specifics of what led to this beating, but whoever had demanded certain things from this DJ or his boss or his radio station or somebody he knew was unsatisfied with the outcome. And there were repercussions.

And this wasn't an isolated case. Jay McDaniel was a former radio guy who ran afoul of the network. Jay McDaniel says he was threatened by a big promoter when he tried to start a record promotion business saying publicly he wasn't going to use payola. Were there threats of violence against you? Yes. What was said to you? It basically came out that I could have my face rearranged.

And then there's the story I heard about another DJ who was found in a ditch somewhere. Someone had beaten him up and injected him with methyl hydrate, the same kind of alcohol used in windshield wiper fluid. By the 1980s, music had become a multi-billion dollar business in America. And the fastest and most efficient way to get the word out on a new song, a new album, a new artist was through radio.

Radio airplay could very quickly make a song familiar with a vast audience and familiarity turn into sales. Sales, of course, equaled money. But with so many releases every week, competition to get on the playlists of as many radio stations as possible was insane. How could a label or a record promoter get an edge? Was there an inside route to turning a song into a hit? Well, there was. It was shady and it was also criminal.

We left things on part one with another high-profile government investigation in the mid-1970s that snared several record executives and DJs. But the decade ended with a modified anti-Paola law that had some giant loopholes that allowed the deeply ingrained practice of Paola in the promotion culture of the music industry to continue. I quote, "...social exchanges between friends is not Paola."

Those seven words ensured that anti-Paola statutes were almost impossible to enforce. This set the stage for the craziness of the 1980s. That was the age of the independent record promoter. And there were some very complex third-party relationships that directed payments and money and other things into, well, money laundering and beyond.

Even with all the stigma around payola, it was still a way of life in the music industry. Although after the investigations of the 1970s, the labels couldn't be seen getting their hands dirty. The 70s also saw the establishment of RICO laws, the Racketeer Influenced Corrupt Organizations Act. The upshot of all this was that record labels could no longer pay off radio stations directly.

They needed to insulate themselves from Rico culpability. And this is where the independent record promoter came in. The indie record promoter was just that: a plugger of records, not directly employed by the record label, but instead someone contracted by the label to push their records to a list of radio stations. These guys, and they were pretty much all guys, were provided a sum of money from a label to put behind specific artists and specific songs.

Their goal was to get records added to radio station playlists. And the labels kind of just turned a blind eye to how all that was accomplished. They just wanted results. And the better the results, the more these indie promoters made in the way of bonuses. This brings us to that loosely affiliated group of about 30 indie promotion men who refer to themselves as The Network.

Things started coming together in about 1978 at the height of the disco boom when top 40 stations were all over that sound and genre. There were so many disco records. But if you had the right relationships and enough cash or drugs, you could get certain records on the air. The network men were headquartered all over the country: Boston, Philadelphia, Buffalo, Cleveland, Los Angeles.

Each member of the network had an agreed-to territory, but it wasn't exactly a geographic area or claim. Instead, a territory was a list of radio stations that the Indyman had claimed to

Those stations could be anywhere in the country, regardless of where the indie man was based. That meant if an indie guy in LA had the relationship with a station in Cincinnati, well then Cincinnati was part of his territory. That station or those stations were claimed by him. So if a label wanted to break a record across the US, they would hire one of the network guys who would then subcontract much of the dirty legwork to their own group of guys.

Take, for example, TK Records. This was a label based out of Miami and home to KC and the Sunshine Band. Miami was a very big test market for dance music in the late 1970s. And if you could bribe a couple of program directors or DJs to play your disco song, then it had a very good chance of breaking out nationally. The targets were mostly top 40 radio stations, although they did work to influence stations that appealed to black audiences, fans of R&B and funk, and early incarnations of hip-hop.

There were indie promoters outside the network too, but they weren't nearly as successful or powerful. However, they were sometimes hired to influence rock and country stations. And everybody had the same goals. Number one, get a station to play the record. And number two, get the station to play the record more.

Compared to the nickel and dime approach of payola in the 50s and 60s, the money began to get exponentially bigger in the 1970s as the music industry grew into a giant corporate industry with six major labels controlling the majority of the market. Smaller labels tried to work this side of the street, but the majors had the financial power to outbid them when it came to bribing radio stations to play their records. So the smaller labels were generally pushed out of the game for the moment.

Over time, the indie record promoters acquired more power over both radio stations and the record labels. So they started raising their fees. The labels lost control over the indie promoters, especially the network guys, and had no choice but to pay whatever the network guys demanded. The labels had created a monster, and that monster was out of control. It was all very organized and very institutionalized too.

What kind of incentives were used? Well, the usual money, Coke, gifts, pokers. There is a story of one program director at a medium-sized rock station somewhere in California who received more than $100,000 over three years for doing the bidding of a certain indie promoter.

Each week, this guy got a birthday card that was delivered to a post office box that he set up under a fake name. Inside was anywhere from $500 to $1,000. And all he had to do was add three or four of the indie promoter's chosen records to the playlist, and all was hunky-dory. Other program directors and music directors received cassette cases filled with cash or coke.

If a programmer didn't want to add a record because it didn't fit with the station's sound and image, or because he was worried about an impact on ratings, well, no problem. You can still play the song. But it would be scheduled to play between midnight and 5am where it couldn't cause any damage. And you know what? That counted as a playlist ad.

Or the program director was paid to lie to trade magazines when reporting what songs were being played on his station. A quick lie to the trades might be worth $7,500. All that mattered was the perception that a playlist ad was achieved. And who found out? Well, no one. Back in those days, it was almost impossible to verify what was really being played on the air.

Trade magazines and other compilers of charts had to take radio stations at their word. So who was going to know if a little white lie was told every once in a while or even every week? Some stations began to depend on this indie money, adding it to their bottom line under the heading of promotional payments, which meant, well, whatever it had to.

The key was to position this income as outside the payola rules. And if it didn't qualify as payola, well, then there was no need to report it to the authorities. Incentives grew depending on the needs of the label and the importance of the record. It wasn't uncommon for $300,000 or more to be dished out to make sure that a certain song made it on the air at stations across the United States. Needless to say, all this had to be hidden from regulators, bookkeepers, bosses, and the tax man.

And business was very good for all those involved for years. But once again, these practices came to the attention of the authorities. And once again, things got ugly. The network needed to be busted up. This episode is brought to you by Shopify.

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We need to make it clear that while payola in the US radio and records industries was rampant through the 1970s and 80s, not everyone participated. There were many, many honest people who refused to play this game. But those who did play often got in very, very deep. The two biggest figures in the network were Fred DeCipio, who worked out of a nondescript office building in suburban Philadelphia, and Joe Isgro, who was headquartered in LA.

DeCipio was young, slick, and went everywhere with a bodyguard named Big Mike. Isgro looked like a mobster out of Central Casting. Black suits, gold jewelry, wads of $100 bills, a Rolls Royce, and two bodyguards. He was also a Vietnam vet who was said to have a box full of pictures of all the Viet Cong soldiers he killed.

They and the other members of the network were happy to take the label's money. They also knew that they were being given more money than it took to really spread the bribes around. And whatever was left over, they kept. But there were also whispers that to keep things flowing, some of the indies kicked back leftover money to the VPs in charge of promotion at the labels who contracted and paid them. So you can see the problem. The labels found themselves in a two-way addiction with the indies.

Not only did they need them to break records on Top 40 Radio, but there were people inside the labels who were getting a taste of the action themselves. And what could possibly be wrong with that, right? Here's the wild thing: no matter how much money was spread around, results were not guaranteed. The public will like what the public will like. If it's a mediocre song, it won't be a hit. You can't force people to buy a record.

Oh sure, lots of airplay will push a song up the charts, but that's a pretty hollow victory if no one buys the record. However, the labels also used the network to achieve the opposite effect. The network could prevent hits for competitors. They would bribe program directors and music directors to keep other records, even good records, off the air. This tactic was used to ensure the dominance of the major labels of the airwaves and stomp on smaller labels, like we mentioned earlier.

Then again, sometimes the indies needed to show the labels who was really in charge. In 1980, Pink Floyd was riding high with their album, The Wall. And this song was released as a single and became a big hit on Top 40 radio. Well, a nationwide hit everywhere except Los Angeles. Now, this was odd.

None of the four top 40 stations in L.A. were playing the song, despite the fact that it was climbing up the charts and a big hit in other parts of the nation. And they weren't playing the song, even though Los Angeles was one of just three markets in the world where Pink Floyd was staging their wall concerts. Now, why was this?

Well, because an executive at CBS Records named Dick Asher tried an experiment. He was alarmed at how much the label was spending on independent promotion, and he wanted to see exactly how much power the indies had. So Asher told his staff, no indie promotion of the Pink Floyd song, Another Brick in the Wall Part Two. And guess what? The song stayed off Top 40 radio until after the wall concerts were done.

The day after the concerts wrapped up, Asher rescinded the ban on indie promotion for Another Brick in the Wall. And that very day, three of the four stations in the market started playing the track. The network had sent a powerful message. If you want to dig deeper into everything, something similar happened with Loverboy and the song Workin' for the Weekend.

In 1981, a few high-ranking label executives at a couple of labels tried to launch a boycott of indie promoters. The results were disastrous, and those labels were soon back paying the indies to push their records. And the price for their promotional services had gone up too. They began demanding money for records that didn't need promotion. For example,

The record had such a stranglehold on what got through the top 40 radio stations that a member named Frank DiLeo was able to charge $100,000 for each and every single that was released off Michael Jackson's Thriller album.

But if you got something from a new artist, oh, gee, that's going to be hard. It's going to take a lot of money. So the price for promotion will be $150,000. No, no, wait, wait, I meant $200,000. Great. We have a deal. $300,000, right? By 1985, the indie situation had reached a crisis point with the labels. The money involved was huge and getting bigger by the month.

Some estimates say that the record labels were laying out an average of maybe $80 million annually to independent record promoters. If we do some math, that worked out to about 30% of the entire industry's pre-tax profits in the mid-1980s. This brings us back to Brian Ross's reporting on payola for NBC News in 1986.

It connected two of the network guys, Joe Isgro and Fred DeCipio, to the mob, including John Gotti of the Gambino family. After that story aired, there was panic among all the labels. They had to distance themselves from this kind of crooked third-party music promotion. And in the days that followed, Joe Isgro, one of the most powerful figures in the network, said that client after client after client told him that his services were no longer necessary.

And it wasn't just his girl. Fred DiCipio and all the other members of the network found themselves in a cash crunch. And the U.S. government finally got interested again. This was referred to as the New Paola Investigation. On April 2nd, 1986, a senator named Al Gore called a press conference. "There will be a new Senate investigation into Paola," he said. But just like two years earlier, the political will collapsed before there was a hearing, and nothing happened.

There was another case out of Los Angeles where one indie promoter was sent to jail, but he was essentially a soldier, not an indie capo. And they didn't get him on bribery or payola charges. They got him on tax evasion. The stories that came out of that, though, were good.

The case found that the indie system shoveled at least a million dollars into the pockets of program directors around the country in exchange for playing their records. And one promoter anonymously admitted that at one time he was paying 15 or 20 program directors $10,000 to $30,000 each per year. Given that these guys made modest salaries at best, this was pretty good action for them. Besides, this was promotion, not payola. That's how everybody rationalized things.

Often these payments were disguised as talent fees and consulting fees, making them appear like legal financial transactions. But by the end of the summer of 1986, it looked like the network had been busted up. Not because of any government action, but by their former employers, the record labels. Payola had been squashed again. Yay. Or had it? Do you even need to ask that question?

After the labels stood up and said no to the network and other indie promoters in 1986, payola did not go away. We just began to see different methods. Let's go back to 1987. The major labels, and there were six of them at the time, were no longer using independent music promoters. But indie record labels, the smaller companies that couldn't compete with the majors in terms of what they were paying music promoters, now found that they could.

See, the guys in the network needed revenue. The days of charging $100,000 to promote a single to Top 40 Radio were over. However, the indie record labels were willing to pay for, you know, a little help that might bring in a couple of thousand bucks per record. The network had now become affordable to the smaller labels. And a couple of thousand bucks per record? Well, at least that was something to the network. I can give you an example. This single was released by a small label called Profile.

They allegedly paid for a little indie promotion. And suddenly, they had a hit song from a group called Boys Don't Cry. That's a fun song. And I'm not suggesting that I Want to Be a Cowboy wasn't good enough to be a hit. But it got to be a hit through indie promotion at a time when the major labels were sitting on the sidelines with their promotion dollars.

Here's another example. British labels had no problem with indie promoters. Island and Virgin, two large UK companies, were never part of any boycott. With the big boys in America no longer competing and driving up prices, Island Records was able to hire Joe Isgro to help make this song a hit. ♪ To the beginning of the face that you were doing ♪ ♪ You can't read, run and act ♪

Again, that's a great song that deserved to be a hit in any universe. But it might have never been brought to our attention had it not been for the major labels disengaging from their old payola ways, paving the way for UK labels to fill the space. And another thing happened. Managers want hits for their clients. So they loved indie promotion. They knew what their labels were doing to get their records on the radio. But what could they do now that the label support had disappeared?

Well, it's simple. Managers started working directly with indie promoters. Joe Isgro, for example, worked with the managers of Billy Idol, Duran Duran, Lionel Richie, Journey, and many others to promote their records. The bill for this indie promotion was sent to managers, and that amount was added directly to the manager's fees billed to the band. So in other words, artists were now directly paying for their own indie promotion.

whether they knew it or not. And who loved this? The record labels. Meanwhile, though, there were more movements from the US government. And in 1989, new payola investigation started. And this led to the indictment and arrest of Joe Isgro, our main man in the network. 57 charges. A few other indie promoters were scooped up too. After six years of botching any kind of payola case, the authorities were finally going to bust up payola forever. Right? No.

The judge threw out the case right in the middle of the trial when he became aware that prosecutors withheld vital information from defense lawyers. The judge called this "outrageous government conduct." Joe Isgro and most of the other people accused of payola practices were free to go. By this time, though, Joe started thinking that maybe indie radio promotion was a little too hot. Instead, he formed his own record label and got into producing movies.

You know the 1992 film Hoffa starring Jack Nicholson? That was a Joe Isgro production. But things later went south for Isgro. In the spring of 2000, he was arrested on charges of loan sharking and extortion. He was convicted and sentenced to four years in jail and was released in 2009.

And then in 2014, he was hit with charges relating to offshore gambling, a scheme with the Gambino crime family. He was also charged with conspiracy and money laundering. That time, though, he was able to cop a plea and didn't have to serve any time. At last word, Joe Isco was out of music and his return to filmmaking. Morris Levy, who we encountered last time, a big player in the payola business, his luck ran out, too. He was the man that paid out so much payola over the decades as the head of Roulette Records.

In the spring of 1990, he found that colon cancer had spread to his liver. Doctors told him he was a terminal case. Back in 1984, he'd been implicated in a shady deal that involved surplus unsold albums and members of the Genovese crime family. Levy had always been suspected of being mobbed up and had been for at least 25 years. And through this deal that went south, authorities were able to prove it.

He was convicted in December 1988 and sentenced to jail for 10 years and fined $200,000. He managed to appeal and remained free on bail. But in December 1989, all appeals were lost. He was ordered to report to jail on July 16, 1990. But Morris Levy died on May 16, so he never served a day in jail.

By the way, if you want to learn more about Morris Levy and his ties to the mafia, check out the Uncharted episode called Music and the Mob. I go through the whole thing. So here we are in the early 1990s. All the payola scandals are over and Top 40 Radio is a clean business. So we're done here, right? Nope.

Between 2002 and 2004, Eliot Spitzer, the New York Attorney General, started learning things about how business was being conducted at Sony BMG, one of the major labels. The company had, in fact, made some deals with some very large radio chains. Epic Records, which was part of the Sony BMG group, got creative. To promote a new Killer Mike song, program and music directors were sent a sneaker. If they could prove that they played the song 10 times, they got the other sneaker.

And that one was autographed by Killer Mike. Arista Records, another Sony BMG property, set up an army of young-sounding people whose sole job was to call the request lines at radio stations demanding to hear certain singles. What happened in that case? We don't really know because the case was settled out of court.

Then Spitzer went after Warner Music Group, another out-of-court settlement. Then it was the turn of Universal, out-of-court settlement. And finally, EMI. They settled out of court in 2006. The fines levied on these labels totaled to a little less than $30 million. Oh, and there was still more. In 2007, four large American radio groups settled with the Federal Communications Commission for a series of payola-type violations.

They all paid $12.5 million in fines and to clamp down on things for at least three years. And that was the last time there was any substantive investigation into payola. So there, that's it, right? Fine, we're done. No. There are still funny things happening, although they're better disguised than ever. Old school indie promotion, just like we had in the 80s and 90s and early aughts, is back.

Independent record promotion still exists today, and it's still a vital part of the recorded music industry ecosystem. Now, again, I have to stress this. Most of the people involved are scrupulously honest. They have to sign contracts, compliance agreements, promising that they won't do anything shady or illegal. I'm looking at one right now, supplied to me by one of the clean indie promoters in the U.S., and the language is pretty clear.

But there are those who still find ways to grease some wheels. And they do it very discreetly, for the most part. And they are hated by the honest indie promoters out there. There are still creative ways to accept money without having it show up on the books as something suspicious. Hey, you need some maintenance on the station van? No problem. I can take care of that for you. How about if I pay for the next couple of sets of station t-shirts? Or how about if I help you out with a contest for your listeners?

In cases like these, special contracts are carefully drawn out that describe the services rendered in ways so that they are legal. They exploit any loopholes in any anti-payola law. But then I've heard stories like this fun station in the eastern U.S., which is, again, happening today. If you remember earlier, I told you that an indie will claim a radio station.

For all intents and purposes, no one other than that indie promoter can approach a station when it comes to promoting music. It is theirs and theirs alone. Okay. This station in the eastern U.S. was claimed by a certain indie. A fee was paid, probably monthly, could be annually, so that every record added to that station's playlist is credited to the indie who claimed it, no matter which label the record comes from.

The indie then reports all these playlist ads back to the labels and submits invoices for services rendered. Again, the contracts are written up in a very specific way to skirt the law. If we pull back the curtain, here's what those services rendered can include. A basic ad to the playlist, which probably means a couple of spins overnight throughout the week, is worth X amount.

If the indie can convince the station to move the song up so it gets a few spins in the evening, that's another fee that could be charged. And if the song makes it into regular rotation, that's another. Today, it probably costs about $5,000 to get a song into what's known as a power rotation. This means that the song gets heard regularly around the clock. And that's just for one station.

Here's another story I've been told. One indie promoter in the US South has claimed about 30 stations. He has a crew that constantly monitors those claimed stations for plays of songs, so he knows exactly what kind of airplay he can bill for. Let's say each of the claimed stations adds an average of two songs a week at $1,000 per. That's over $100,000 right there. If half the stations report rotation increases for two songs at, well, let's say $500 each...

That's another, I don't know, $15,000. And if just five stations push a song into power rotation, that could be another $15,000 or $20,000. So that's anywhere from $100,000 to $150,000 per week going to just one indie promoter with a big stable of claim stations. There are still guys who work directly with artist managers too, and sometimes even with the artists themselves to make things happen with radio.

And you would be very surprised at which artists find themselves having to pay indies through their record labels to promote their singles. That's supposed to be the job of the label. Anything the labels pay out on their behalf is recouped from the artist's royalties. And these are big, big artists. They don't want to do this, but this is how the game works. Remember, an indie with hooks into a bunch of radio stations can stop a record from being added to a playlist. No ads, no airplay, no hits.

Remember CBS Records' experiment with Pink Floyd in Los Angeles and that other problem they had with Working for the Weekend by Loverboy? Meanwhile, the labels find themselves in the same spot that they were in in the 80s and early 2000s. The indies have such a stranglehold on radio airplay that they have no choice but to enlist their services again. Oh yeah, from time to time they'll have a fit and unilaterally cut the amount they pay to indies, but they almost always go back.

I get emails all the time from people who promise to get an artist's plays on streaming music platforms for a certain fee. Most of them use bots, that fake listening, by real humans. The more listens a song gets on, say, Spotify, the more emphasis it gets from the algorithms. And listens equals hits. American payola and various pay-for-play schemes are not going away. This is an issue that's been around for a hundred years now.

Does this happen in other countries? Probably, inevitably. But there are territories like Canada where it's so rare as to be non-existent. I worked at the highest levels of radio in Canada. And not once did anybody ever offer me a bribe. Not once, not even a sniff of one. Can payola ever be stamped out? Well, if these last couple of episodes prove anything, the answer is no.

You can catch up on all episodes of Uncharted by downloading them all from your favorite podcast platform. Again, if you want to know more about Morris Levy's notorious dealings in the record industry, download episode three called Music and the Mob. If you have any questions or comments about anything you hear on this podcast, shoot me an email, alan at alancross.ca. We can also meet up on all the social media sites, along with my website, ajournalofmusicalthings.com. It's updated with music news and recommendations every day. And there's the free daily newsletter that you should get.

And please check out my other podcast, The Ongoing History of New Music, which deals with rock music at large. There are hundreds and hundreds of episodes that you can enjoy all for free. See you next time for more stories of crime and mayhem in the music industry. Episodes arrive every two weeks. Technical Productions by Rob Johnston. I'm Alan Cross.