Payola was known to exist in the 18th century when English composers relied on bribes to get their songs performed. The term "payola" was coined by Variety magazine in 1938 and was made up from a combination of "pay" and "Victrola" (LP record player). Prior to the famous case and passing of the anti payola statute it was not illegal in American although commercial bribery was. The popularity of television and drama programs had an adverse effect on radio drama which virtually disappeared over night leaving hundreds of hours to fill. The record companies stepped in and radio became a showcase for popular music.
In the 50s four separate events converged to make Payola so critical in the 50s. The popularity of rock 'n' roll, the emergence of teenagers as an economical force; the introduction of the inexpensive 45 RPM single, and the establishment of the singles charts which were played on radio. As a popular shift from live music to recorded music took place record companies grew exponentially. Radio airplay was the easiest way to gain public exposure but companies released hundreds of singles per week and expectation was less than 10% would be able to make a profit. Record labels hired promoters to pay deejays to feature certain songs. The epitome of success was to have a record in “Top 40" and the competition was fierce. The big DJs were a kingpin and blatantly accepted cash and other incentives to promote some artists until the payola scandal became public in 1959.
In 1960, US Congress amended the Federal Communications Act, specifically sections 317 and 507, to outlaw under-the-table payments and require broadcasters to disclose if airplay for a song has been purchased. Payola carried a penalty by up to $10,000 (US) in fines and one year in prison. By the mid fifties independent record companies had broken the stranglehold of the major groups and Broadcasting Music Industry (BMI) licensed songs dominated the charts. BMI was a performer’s rights organisation and represented most of the black and Southern musicians who were the leading force behind rock n' roll. The American Society of Composers, Authors and Publishers (ASCAP) was suspicious BMI were being preferred because greedy deejays were accepting incentives for playing certain music. Their following was considerable and unsuspecting teenagers would automatically buy what their favourite DJs spun. ASCAP lobbied the House Oversight Subcommittee Chairman Oren Harris to look into the recording industry's practice of payola. Alarmists within the American Government were concerned at the moral implications of juvenile behaviors especially in the wake of Rock ‘n’ Roll. Sensitivities too were sharpened after the quiz show scandals of the previous decade. Claims that payola had been rampant in the music business since the twenties were rife and many critics felt radical music such as jazz and the big band sound was forged by unfair commercial incentives. The Oversight Subcommittee started an investigation of the role of deejays and the records they played on their shows. Fearful of reprisals many record companies named deejays they had given money to and very soon twenty five (25) deejays and program directors were in the frame. This involved most of the top DJs of the times but the probe quickly focused on Dick Clark and Alan Freed who were the two celebrities closest associated with Rock ‘n’ Roll. The effect was devastating on both and they lost their jobs almost immediately.
Alan Freed was accused of receiving payment of cash in exchange for airplay and was indicted for accepting $2,500 as an incentive to favour certain records on his radio program. Alan Freed refused to sign a statement admitting he was involved in payola but did declare he accepted gifts for his patronage. Alan was charged with 26 accounts of commercial bribery. Les Paul and Bobby Darin defended themselves against charges they paid to appear on Alan Freed's popular TV show.
Dick Clark admitted to owning interest in 27% of the records he played but those records had a 23% popularity rating. The record company was called Jamie Records and was founded in Philadelphia in 1957. Dick Clark promoted Jamie Records’ artists on his American Bandstand television program. This exposure transformed the small label into a major independent record label with numerous hits and million-sellers. By the time Dick was called to the committee he had given up all outside interests connected with the recording industry which went in his favour. Clark’s testimony was adjudged to be enough to clear his name although some suspicion fell upon his questionable business acumen. Alan Freed was less fortunate and he was fined with a six months suspended sentence. Blacklisted his career was in tatters, and the once Prince of Spin, died penniless in 1965. At the end of the investigation the Senators could find nothing illegal. In mid October, 1959 ABC-TV told Clark to give up these outside businesses or leave the network. Clark sold those interests.
Today, the majority of DJs are cut out of the song-picking decisions which are chosen by a selection committee. "Pay-for-play," does exist and describes airtime which is bought but the payments are disclosed. The practice is generally frowned upon because it favours the bigger labels although it is a promotional ploy used often to encourage attendance at artists’ live concerts. Payola still exists on certain Internet radio stations.