Pay-to-Play: Prohibited or Rite of Passage?

You’ve heard the deal before:  get a slot at this summer’s music festival by pre-purchasing 40 tickets in advance.  Some see it as a rite of passage, others a blatant scam.  Whichever way you see it, here is a legal breakdown of the pay-to-play arrangement:

What is it? There are several ways to interpret “pay-to-play.”  Some define it in the literal sense: to play a certain venue, a band must pay an out-of-pocket fee.   Promoters and venues define the process in terms of “presale” tickets. This presale process is the one usually sold to relatively unknown and untested bands.  Under this arrangement, a band is given a certain number of tickets to sell (to their friends, family, fans, etc). These, however, are not comp or promo tickets – a band is required to pay the promoter/venue for the tickets up front.  If the band is unable to sell the tickets on their own, they have to eat the cost (i.e. paying for the ability to play the show). 

History: Pay-to-play has existed in various forms throughout the history of the music industry, most notably during the 1950s “Payola” scandal where record labels would regularly pay radio stations to play songs as part of their daily lineup.  It is less known, however, that pay-to-play is actually legal in radio as long as the payment is disclosed on air.  Federal law denotes the requirements for disclosure under the law, stating:

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“All matter broadcast by any radio station for which any money, service or other valuable consideration is directly or indirectly paid … the station so broadcasting, from any person, shall, at the time the same is so broadcast, be announced as paid for or furnished, as the case may be, by such person…” (see 47 U.S.C. Sec. 317)

Problems with undisclosed radio pay-to-play are not a thing of the past.  As recently as 2006, major labels paid multimillion dollar payments to settle state and federal inquiries into illegal pay-to-play arrangements.  The government’s regulations against broadcast pay-to-play are clear, where the arrangement for performance pay has yet to be formally discussed.

Is it Legal? Is the band/venue pay-to-play arrangement legal?  In short, the answer is “yes.”  Falling into the “you-get-what-you-pay-for” category, there is nothing illegal, per se, about the arrangement.  It is no less legal then a venue contracting a band to play for free, pay them in beer, or pay a few bucks for a full night’s work.

Black’s Legal Dictionary defines a valid contract as “an agreement between two or more parties creating obligations that are enforceable or recognizable at law and supported by consideration.”  Consideration is simply defined as “something of value (such as an act or return promise).” In the case of pay-to-play, the band is paying money (something of value) to a promoter in exchange for the promoter allowing the band the exposure of performing at a live venue (something of value…if in the eye of the beholder).  Essentially, like any arrangement you freely enter into on your own accord, pay-to-play is a good deal if you think it’s a good deal.

Pros: For a band (especially one that is new or untested) pay-to-play can be an avenue to playing a live venue.  For their press kits and touring lineup, other bands may see an advantage to playing at a historic or reputable venue (i.e. Whisky A Go-Go).  Bands further along in their career may have the opportunity to buy on to a major tour as a supporting or opening act.  It is up to each group to determine the risk vs. reward in choosing to pay for exposure.  Often times the decision will rely on the degree of meaningful exposure offered.

For the promoter, there is little to lose financially from this arrangement.  It ensures profits while all but eliminating risk.  Some promoters support their actions in contract, disclaiming that if a band does not think it can sell the pre-sale tickets it should not sign the agreement.

Cons: Of course, there are huge downsides for acts who sign up for pay-to-play and/or “presale” deals.  Bands often find themselves paying hundreds of dollars to perform limited sets along with a random assortment of other acts.  The line-ups, particularly with many festivals, are assembled based upon ability to pay the promoter or sell tickets – not because they fit a certain bill or attract a similar audience.  In addition, with “presale” arrangements, the promoter has substantially less incentive to list the event, poster the area to encourage attendance, work with a publicist, package similar acts, or otherwise promote the event.  Often times this scenario can lead bands to perform (1) in empty halls or (2) for “friends and family” of the acts.  Neither scenario is particularly beneficial for exposure.

For promoters, the downsides are related to credibility.  Most respected, popular, and successful venues and promoters don’t require presale tickets.  Their success comes from establishing venues in saturated music markets and finding a good balance between booking, promoting, and sales.  Pay-to-play promoters unable to secure viable acts continue to require bands to pay for the opportunity to perform, and the cycle continues.

There are entire sites dedicated to educating bands on “pay-to-play.”  For more specific information, visit a band run site at which details an array of facts deterring bands from participating (not to mention a victorious lawsuit to boot).

Adam Barnosky is a Boston-based attorney and writer.  For industry trends, legal updates, or to request an upcoming Legal Pad topic, find him on Twitter @adambarnosky.

DISCLAIMER: The information contained in this column is general legal information only and should not be taken as a comprehensive guide to the law. Consult your attorney for all specific considerations.

photo by Leo Newball, Jr

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