(The letter and documents referred to follow :) FEDERAL COMMUNICATIONS COMMISSION, Washington, D.C., April 13, 1960. Hon. OREN HARRIS, Chairman, House Interstate and Foreign Commerce Committee, DEAR CONGRESSMAN HARRIS: At the conclusion of my testimony before your committee on H.R. 11341, Mr. Borchardt of the committee staff gave me the following questions which you wished me to answer: (1) Have you not advocated in speeches that the Commission consider community needs as to programing? (2) How do you suggest securing information on community needs unless you give interested groups a chance to testify in local hearings? Do you have any alternative method to suggest in lieu of local hearings? My answer to the first question is "Yes, I have so advocated." I discussed this problem at some length in the speech before the Television and Radio Advertising Club of Philadelphia on February 11, 1960. I am enclosing four copies of that speech. You will find your second question fully discussed beginning with the fourth paragraph on page 5 through the penultimate paragraph on page 7. I believe that if the proposals there advanced are put into effect, the Commission will obtain the information concerning community needs and desires which it should have to determine whether the application under consideration would serve the public interest, convenience, or necessity. However, I do wish to make clear that I do not submit this proposal as a substitute for hearings in all cases. I am certain that in some situations the Commission will find it necessary to conduct hearings before it can dispose of the applications before it. In many cases where such a hearing is necessary, it may very well be that the information sought can more effectively be obtained by holding the hearing in the area to be served by the station. The Commission is not adverse to holding such hearings where they are warranted by the facts. Sincerely yours, FREDERICK W. FORD, Chairman. EXCERPTS FROM ADDRESS OF COMMISSIONER FREDERICK W. FORD BEFORE THE TELEVISION AND RADIO ADVERTISING CLUB OF PHILADELPHIA, FEBRUARY 11, 1960, REFERRED TO IN MR. FORD'S LETTER * There remains for consideration the problem I posed initially. How can the Commission exercise its duty to make the required finding with respect to the public interest, convenience, and necessity and at the same time safeguard to the broadcaster the basic principle under the law that he has the primary responsibility to program his station in the public interest? For the answer to this problem I would like to present the solution I offered last August: "It appears to me that one course the Commission could follow would be to ask the licensees to tell us in narrative form1 the broadcast needs of the community they serve and to then explain how those needs had been and are to be met. The broadcaster himself is in a far better position to do that than anyone else, because after all it is his basic and primary responsibility to determine those needs and to serve them, whereas our only function in this area is to assure ourselves as best we can that he is carrying out his primary responsibility in order that we can conscientiously make the finding that he will serve the public interest which we are required to do by law. "This solution seems so simple and so basic that it is very difficult for me to understand how there can be any disagreement about it. So far as I know, no one at the Commission has the slightest desire to tell any broadcaster that he should or should not broadcast any particular program. It has been my observation that we all feel very strongly that the broadcast licensee should serve the public interest and that he should make an accounting to the Commission under the law for his stewardship of the public property committed to his care. 1 The present program section of our forms calls for statistical information which gives the Commission a picture of the overall programing operations and also makes provision for a voluntary narrative statement. Full advantage has not been taken by the licensees of this provision. Obviously, if this suggestion is followed, an enlargement of the renewal staff would be required. "No broadcaster should ever feel that he is in a straitjacket of any kind nor that his programing flexibility is fettered or his imagination is circumscribed. He should take seriously the burden and trust that the Congress has placed in him that he will properly exercise his privilege to serve all the publc in his service area. How he is to do this is his problem, but that he must do it the law demands. Our problem is to determine whether he has done it and plans to continue to do it." At the present time a form is provided for setting forth a statistical breakdown of the applicant's past programing and future proposals. Data for past programs is derived from a so-called composite week, composed of the 7 days of the week selected individually from dates throughout the previous calendar year. The programing for each date is compiled percentagewise on the basis of program categories-that is religious, agricultural, entertainment and so forth. It is also broken down in terms of commercial and sustaining time, network, live recorded, et cetera. The applicant is asked to supply similar data as to the programs proposed for the forthcoming license term based on what he estimates as a typical week's program schedule. Also of course the percentages as to past programing can be compared with what had been proposed in the previous renewal period, so that from a quantitative standpoint it can be seen how his performance during the preceding license term compared with what he had originally proposed. While such a system has certain advantages, its weaknesses are also readily apparent. The data is purely quantitative indicating nothing about the quality of the programs themselves. It necessarily relies on arbitrary definitions of program types and categories which really tell little of the spiritual, educational or entertainment content of the programs themselves. And most importantly, it does nothing to relate the programs to the desires and needs of the community involved. In April 1958, shortly after I became a member of the Commission, in a statement to the National Association of Broadcasters' Convention in Los Angeles, I was very critical of the present program portion of the application forms as requiring a lot of information we do not need and failing to ask for information would be meaningful. It occurred to me at the time that "our forms require that certain percentages be submitted and then on the basis of those percentages we look in a crystal ball and say that proposal for the renewal of the application [sic license] meets the needs of the community to be served." We presently have under consideration a revision of the program section of our application forms. A notice of proposed rulemaking has been issued, based in part, on recommendations of an industry-government committee. Comments have been received and are being analyzed by the Commission's staff. It may be that before the matter is concluded our original thinking will be transformed considerably as a result of the programing inquiry we have been conducting. I have already indicated that my own views call for an approach to the problem that is basically different from what we now require. Specifically, I think that the composite week and the reliance on percentages which it entails should be eliminated entirely. In its place I would substitute a statement in narrative form in which licensees would submit evidence of their efforts to determine the programing desires and needs of the area they serve in order to establish a standard of public interest, convenience, and necessity for their stations. If properly done this evidence should give some indication of the program balance desired by the public of that area. It would also permit a meaningful showing of the way in which the broadcaster has programed and proposes to program his station in order to discharge his obligation to serve the public interest, and prove his responsibility as a licensee. The CHAIRMAN. The first witness this morning is the distinguished chairman of the House Committee on the Judiciary, our colleague from New York, the Honorable Emanuel Celler. Mr. Celler, we will be glad to hear you at this time. STATEMENT OF HON. EMANUEL CELLER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. CELLER. Mr. Chairman, I appreciate the opportunity to present to this distinguished subcommittee my views as to the urgent need for favorable consideration of two measures which I introduced on March 28, 1960, to deal with payola in the broadcast of music. The first, H.R. 11397 would make it a criminal offense to give or receive payola payments as an inducement for broadcasting musical works or recordings. The second, H.R. 11398 is a companion bill which would make it mandatory for the Federal Communications Commission, in determining whether a broadcast license should be renewed. to consider whether the applicant has himself received payola, or consistently permitted such practices in the operation of his radio or television stations. At the outset, it is my considered judgment that the chairman and members of this subcommittee as well as the membership of the Legislative Oversight Subcommittee are to be commended for bringing to light payola practices that have become associated with, and tainted, the broadcast of popular music. Such practices have affected the public interest most adversely. For, at the very least, the American people are entitled to expect that the music they hear on their radio and television sets will be chosen by broadcasters impartially. Yet, the inescapable fact is that record companies have been paying surreptitiously vast amounts of money to television and radio disk jockeys, other station personnel, and even station licensees so that designated records will find a preferential place on station turntables. Nor is this an isolated practice. On the contrary, it has extended to such major cities as New York, Boston, Philadelphia, Cleveland, and others throughout the Nation. Such under-the-table payments represent a particularly vicious form of commercial bribery since they have influenced to a considerable degree the selection of recordings for broadcast. In effect, the practice constitutes a hoax on the listening public which is led to believe that the recordings involved were selected strictly on the basis of merit or public popularity. The teenage market happens to be the one immediately affected but the seeds of corruption are spread on a much wider scale. Thus, the president of one record company, which had admittedly been paying over 250 big city disk jockeys to promote its records on the air, characterizes the payola practice as "a dirty, rotten mess" that "has been getting worse and worse in the last 5 years," so much so that "you can't get your records played unless you pay." Likewise an official of another record company told the Federal Trade Commission the other day that his company was compelled to make payola payments to disk jockeys to get exposure of its records, because all distributors were doing it and none could avoid it since records cannot succeed without exposure. The conclusion is that payola has assumed striking proportions. For illustration, one diskjockey admits having received some $15,000 from record companies over a period of little more than a year, in addition to his $40,000 a year station salary. Another disk jockey is driving an expensive new car the payments of which are being made by a record distributor. In other cases, disk jockeys receive a monthly "retainer" to plug designated records or are even given a share in the music publishing or recording business. Beyond this, interest-free loans in substantial amounts, expensive luxury items such as color television sets, and other gratuities-all constitute a form of special inducement by record distributors to give preferential broadcast treatment to particular recordings. Payola practices in one form or another antedate both the modern record business and the disk jockey. In the 1920's, the practice was not uncommon in vaudeville, where performers took under-the-counter payments for plugging a song. In the 1930's, when records and disk jockeys had not yet reached their present eminence, payola was concentrated in the dance band business, with some leaders of the socalled big-name bands pocketing side profits from payments by music publishers and recording companies. By the late 1930's, payola at the band level was so rampant that several music business executives made an abortive attempt to work out a fair practices code aimed at outlawing the practice. Toward the end of the 1940's, when network radio gave way to television, empty radio hours brought the local diskjockey into his own. Today the diskjockey's choice of records to be played or exposed over the air provides the key to an enormously exploitable market composed in considerable part of a large group of impressionable teenagers who, in 1958 for example, helped to swell popular music's gross profit to an aggregate of some $106 million. Payola currently is mainly concentrated in the so-called single records the 7-inch disks which are manufactured primarily for the teenage market and which today dominate musical programing on radio. There are some 700 record manufacturers producing records on a consistent schedule, although many hundreds more turn out records sporadically. From these sources, about 200 "single" records are released weekly. Of this number, only a few become hits. The competition for a place at the top of the record list is intense because the diskjockey obviously lacks sufficient air time to promote everything he receives. How widespread payola has become is demonstrated by recent findings of the Federal Communications Commission. A few weeks ago that agency disclosed that on the basis of evidence gathered from a questionnaire sent to the country's more than 5,000 radio and television stations, it had found illegal payola "prevalent" in many forms, with cases involving "willfulness, misrepresentation or serious neglect" on the part of broadcast licensees as well as a "possible abdication of licensee responsibility." Another governmental agency, the Federal Trade Commission has thus far issued some 70 complaints against record companies, including major distributors, charging them with payola. These cases involve over 255 diskjockeys, operating in 56 different cities, located in 26 States. Sixteen companies have already entered into consent orders binding them not to make such payments in the future. Moreover, 100 additional cases have been docketed by the Federal Trade Commission for investigation. In all, it has been estimated that over 50 percent of the records which achieved top popularity last year were released by record companies now facing charges by the Federal Trade Commission. Notwithstanding the prevalence of payola in the broadcast of music, the Federal Communications Commission did literally nothing to eradicate the practice until recent congressional disclosures. It was not until December of last year that the Commission took the first step-a payola questionnaire sent to all broadcast licensees which was, however, limited to inquiry about payola practices dating only from November 1, 1958. Even now the attitude of the Federal Communications Commission is most disturbing particularly when its present Chairman regards payola as merely "symptomatic of a certain degree of laxity of licensee responsibility" and expresses the vague hope that "proposed actions now underway, can give the public assurance that [payola] will no longer be a part of the broadcasting scene." I fail to see the basis for such optimism. Nor is it reassuring that in the words of the Chairman of the Federal Communications Commission 4,131 or 88 percent of the radio and television stations on the air stated in effect that they either received no payola or it was limited to free records. What of the 515 stations on the air where according to the Commission Chairman the station or its employees had received cash or other consideration for broadcasting material without the required "sponsorship" announcement having been made. In my judgment it is a matter of profound concern that about 12 percent of the stations of this country have, by their own admission, been in apparent violation of the spirit if not the letter of section 317 of the Communications Act in the course of a 1-year period. The equanimity with which the regulatory agency regards the present state of affairs only emphasizes the need for additional legislation. Beyond this, certain important segments of the broadcasting industry appear to be unwilling to set their own house in order. As an example, over 32 years ago the president of a major radio and television network admitted in public hearings before our Antitrust Subcommittee that payola and "plugola" had been "plaguing the industry for a long time." This admission was accompanied by reference to a comprehensive network memorandum on the subject, unearthed by our subcommittee staff, which began by asking the prophetic question: Is there a danger that an exposé of the growing payola enterprise in our industry *** will spark a Government investigation * * *? This memorandum, dated July 14, 1955, was prepared by a network executive for his superior who was in charge of the department "concerned with the standards of the medium." It named names, detailed a variety of remarkably well organized payola and "plugola" practices in high places, and warned that they not only might be endangering the networks public relations but the entire free radio and television industry. Here was the spectacle of disreputable practices which had long been common knowledge in trade circles, brought forcibly to the attention of top broadcast officials. Failure by these officials to institute appropriate corrective action is now a matter of history. |