Here is the second in our series of articles about a report the FCC released earlier this month about the current state of the news industry. On Monday we provided an excerpt from the report that covered how the Internet has altered the kind of news people receive by impeding on the profits of traditional news outlets. We continue that theme today with an article from the section of the report , about the backroom deals advertising agencies have begun making with the sales staffs of TV news stations.

The “ad-edit wall” is the line of division between the advertising room and the editorial room in a news office. It exists to protect the news from monetary influence that would threaten the integrity of the content editors generate. But, according to the report, television news stations over the past decade, in their scramble to restructure themselves in more fiscally solvent ways, have begun chipping away at this wall, with a tactic called “pay-for-play,” which is when advertisers pay news shows to cover certain stories that reflect favorably on their clients. Essentially they’ve begun engaging in product placement through their news stories. As Stacey Woelfel, former head of the Radio Television Digital News Association puts it, “It’s the station looking for a dollar here or there where they did not have to worry about it before. What do they have to offer? Well…airtime.”

The report cites the example of a news organization called WEAU in Eau Claire, Wisconsin, which made a deal with a local hospital in 2008 to air two health-related stories every week that were selected from a list the hospital provided. Reporters would then interview the hospital staff exclusively for these stories. The deal eventually fell through after several journalists complained and one resigned, but similar deals are cropping up all the time, particularly in the health industry, which requires a level of expertise news stations can no longer afford on their own. Trudy Lieberman, a professor at Baruch College at the City University of New York, conducted a two year study on how the pay-for-play phenomenon has come into effect. “Viewers think they are getting health news,” she said, “but they are getting a form of advertising.”

Some TV producers have defended the right to orchestrate these deals with advertisers, provided the resulting stories come with disclaimers. Others see the issue as a betrayal of public trust. But evidence that industries have infiltrated reporting pervade in all different forms. Forrest Carr, a former ethics fellow at the Poynter Institute and a news director for stations in Florida and Arizona, described it as “stealth advertising.” He discussed one incident in particular, when a TV station covered a food special held at a mall during a local flood. “It’s pretty obvious the station was getting paid to do that at the mall.”

Producers feel better about inserting this kind of advertising into morning news shows, because the expectation is that they aren’t hard-hitting news shows. This has lead to what producers call “value-added shows” which are shows created specifically for the purpose of making pay-for-play deals. The management at KUTV in Salt Lake City approached Steve Hertzke, news director, with an idea to create a show that would be 90 minutes long. The first 30 minutes would be untouched by stealth advertising, while the final 60 minutes wouldn’t. Hertzke raised the objection that the audience wouldn’t be able to differentiate between the two. The response, he said, was that they needed the “revenue because it is revenue that hasn’t been tapped.”

While management is mixed on the subject, most journalists and people involved in the creative process are against the notion of pay-for-play. But the trend shows no sign of stopping. Woelfel says it hasn’t gotten any better or worse over the last five years. Tom Rosensteil, director of the Pew Project on Excellence in Journalism, says he hears different from news directors. James Rainey, a media reporter for the Los Angeles Times who recently won the 2010 Bart Richard award for media criticism for uncovering in a series of articles at least three different instances of pay-for-play, predicted it would only get worse:

The trend promises to continue and grow. TV news producers must fill an expanding news hole, particularly in the mornings, where many news programs have been extended from three to four, five and even six hours. And advertisers, fearful of being blocked by viewers with video recorders and mute buttons, don’t mind paying for promotional appearances that make them more visible and credible.

News shows, particularly morning news shows, are also using literal product placement, with gestures as subtle as keeping McDonald’s coffee cups on the anchors’ desks. A 2006 survey found that out of 251 TV news directors, 12.4 percent said they had or were considering product placement.

Yet producers maintain that these practices aren’t unethical. Stations insist the companies that pay for their products to be shown on screen, aren’t affecting content, and that they don’t allow product placement during less entertainment-driven news shows. And while there have been numerous examples of pay-for-play stories the public were led to believe were real, these are considered outright violations. Most stations say they always indicate when they’ve made a deal with a business for a story.

Still, some news managers have refused the practice outright, and very few journalists are comfortable with it. It’s been a major contributor to the fear and uncertainty currently surrounding the news industry, and many journalists see it as a threat to the credibility of their craft. But if it comes down to a fundamental argument between the business side and the creative side of the news industry, it’s the business side that’s gained a whole new leverage as it’s watched profits disappear. Maybe the business side has won. “Our sales department comes to the newsroom with story ideas they’ve already sold,” One news executive in a Pew study put it. “They just need a reporter to do the story.”

Or maybe both of them have lost.

Justin Spees

Justin Spees is an intern at the Washington Monthly.