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Sony Settles Over Payola; FCC Could Investigate

Sony has settled with New York State, according to Attorney General Eliot Spitzer, over charges of  "pay for play," but the issue isn't likely to end there.

Sony's BMG Music Entertainment has agreed to pay a $10 million settlement and not to pay money or provide "expensive gifts to radio stations and their employees in return for 'airplay' for the company's songs."

The settlement came after a year-long investigation by the state. But it is not the end of the broader investigation into payola, said Spitzer.
He said the investigation was more about achieving structural changes than targeting invidivual companies, and subpoenas have been sent to radio giant Clear Channel and Infinity, among others.

According to Spitzer, Sony agreed to "stop making payoffs in return for airplay" to "fully disclose all items of value provided to radio stations," as well as to adopt "corporate-wide reforms, including hiring a compliance officer responsible for monitoring promotion practices and developing and implementing an internal accounting system designed to detect future abuses."

Spitzer said it was "the first time an entertainment company has agreed to such sweeping reforms."
Elsewhere, FCC Commissioner Jonathan Adelstein, who has made examining payola and plugola on radio and TV a priority, Monday called for a separate FCC investigation.

"We've seen a lot of smoke around payola for a while, but now we know it’s coming from a real fire," Adelstein said. "It’s time to dump a bucket of cold water on it.

"It's unfair to listeners if they hear songs on the radio because someone was paid off, not because it's good music."

"We need an immediate investigation to determine whether these practices violate federal payola laws.  I’ve asked Mr. Spitzer to share all of the evidence that he has uncovered with the FCC.”

Fellow Democrat Commissioner Michael Copps seconded Adelstein's call, saying: "We're now seeing how pervasive a problem payola is. This commission has a responsibility to aggressively enforce the law." 

Spitzer said BMG's payola took several forms, including:

• Outright bribes to radio programmers, including expensive vacation packages, electronics and other valuable items;

• Contest giveaways for stations' listening audiences;

• Payments to radio stations to cover operational expenses;

• Retention of middlemen, known as independent promoters, as conduits for illegal payments to radio stations;

• Payments for 'spin programs,' airplay under the guise of advertising.

Spitzer agreed to turn over information from his investigation to the FCC.

Federal penalties for the record promoter could include civil and criminal sanctions. Stations who failed to disclose the payments could face license revocation.

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.