http://www.latimes.com/business/la-fi-payola23jul23,0,4233398.story?coll=la-home-headlines
Sony BMG to Settle New York Payola Investigation
Music giant makes a deal with New York Atty. Gen. Eliot Spitzer over case involving payments for airtime
By Charles Duhigg and Walter Hamilton
Times Staff Writer

4:58 PM PDT, July 22, 2005

Sony BMG Music Entertainment, the nation's second-largest music company, is expected as early as Monday to agree to a settlement with New York Atty. Gen. Eliot Spitzer in an ongoing payola investigation, said sources familiar with the talks.

Representatives of Sony BMG and Spitzer declined to detail ongoing discussions, but sources said the terms of the settlement might include promises that Sony BMG would not engage in certain practices and fines that might exceed $10 million. The sources requested anonymity because of the confidentiality of the discussions.

Sony BMG is one of at least four record companies Spitzer subpoenaed last fall as part of his inquiry into whether music corporations are skirting payola laws by hiring intermediaries to influence which songs are heard on public airwaves. Should Sony BMG reach an accord with Spitzer, it would be the first settlement in the investigation.

Insiders at other record companies said they expected that a Sony BMG settlement would spur other music corporations to agree to similar deals with Spitzer's office. Those executives said whatever fine Sony BMG might accept probably would also set the standard for other companies, which would be fined in proportion to each company's share of the U.S. market.

Last September, investigators in Spitzer's office subpoenaed executives at the four major record corporations -- Universal Music Group, Sony BMG, Warner Music Group and EMI Group -- to request copies of billing records, contracts, e-mails and other correspondence regarding the companies' relationships with independent music promoters who suggest new songs to radio programmers.

Those intermediaries have long been suspected of passing payments to deejays in exchange for airplay of specific songs. Such payments would violate a federal statute known as the payola law, which prohibits broadcasters from taking cash or anything of value in exchange for playing specific songs, unless they disclose the transaction to listeners.

In May, Sony BMG divulged that at least a dozen executives, including Sony Music U.S. President and Chief Executive Donnie Ienner, had received subpoenas.

Since Spitzer's investigation began, the three other record companies have circulated internal memos outlining unacceptable promotion practices company insiders said.

Radio airplay is considered the most powerful promotional tool for record companies. In the past, labels blatantly traded cash, drugs and prostitutes for airplay.

Today, record companies pay independent promoters to persuade radio programmers to spin particular songs.

The independent promoters pay radio stations annual fees, sometimes in excess of $100,000, in exchange for advance copies of the stations' playlists. Promoters say these fees do not influence a radio station's choice of songs. However, critics suggest that the payments are a way to skirt the law.

Last November, Infinity Broadcasting Corp., the nation's second-largest radio broadcaster, fired a programmer suspected of accepting gift certificates from an independent promoter. In January, Entercom Communications Corp., another radio broadcaster, fired a top programming executive amid an internal investigation into whether he accepted travel packages and other gifts directly from record label executives.

Since then, Infinity announced that it would sever the company's ties with independent promoters. Radio heavyweight Clear Channel Communications Inc. announced in 2003 that it would not renew contracts with independent promoters

Maybe they didn't do anything wrong. Maybe they just want to avoid a lengthy court battle, like so many music-lovers who settle out of court. Maybe pigs really do fly.

so they are going to have to pay a fine eh? and who will be collecting this fine? and do you suppose that the ones injured by their actions will see any benefit from this punishment or do you think the government will absorb the cash to cover their "expenses"?

This is one reason I believe corporate settlements of this kind should be outlawed.

"fines that might exceed $10 million"

They'll just sue another 10,000 people, hoping that 3500 settle and pay this back.

The record labels are far too greedy to pay this settlement if they were really not doing anything. Or it's worth that much to keep Spitzer out of their accounting records.

"Sony BMG is one of at least four record companies Spitzer subpoenaed"

Since there are only four of them...

"In the past, labels blatantly traded cash, drugs and prostitutes for airplay."

They spent 30 years calling radio a bunch of pirates. Then the labels start paying radio to do exactly what they cried about for 3 decades.

In 1940, radio banned ASCAP, which was the RIAA of the day. The gave them what they asked for -- for 10 years, they stopped playing their music. Ten years after that, the labels were paying radio.

"Radio airplay is considered the most powerful promotional tool for record companies."

Was. Past tense.

Now it's p2p. Just think, only 25 more years until the RIAA starts paying p2p users instead of suing them. The only reason it'll take so long is because another 15 years will be required for p2p users/companies to catch the obvious clue.

Maybe NOW Indie artists can get a little better playing field for radio play????? Or maybe the major labels didn't want to expose their financial records and have all their dirty little secerts reveled??? What ever happen to the guy who was going to send boycott all the dirt on the music biz so we could know all their dirty little secerts Hmmmm ????

Slap on wrist, no admission or proof of actual wrongdoing, be more careful in NY, business as usual everywhere else.

Am I missing anything?

No. You're right on the money, Jefrystube.

Mistakes were made. Vote Quimby.

""Radio airplay is considered the most powerful promotional tool for record companies."

Was. Past tense.

Now it's p2p."

Get out of town. Radio is still the most powerful promotional tool. Most people go on p2p to download what they heard on the radio! Suckers. Sheep.

"Maybe NOW Indie artists can get a little better playing field for radio play?????"

No way.

"sources said the terms of the settlement might include promises that Sony BMG would not engage in certain practices"

I would like to know what these "certain practices" are. In any case, labels will still be paying money to someone and radio stations will still be receiving money someone.

"Radio is still the most powerful promotional tool."

You left out "But we've always done it that way."

You should really hang out at the Future of Music site, mroop. They believe this fantasy, too.

Payola has been rampant since the 19th (!!) century when music publishers bribed salesmen to favor their sheet music in sales talk. It has never ceased, and it never will.

It reached sad heights in the 80s when major labels were reported to spend up to 40% of their profits for payola.
Even the Mafia got involved at that point.

Interestingly enough, there already have been several attempts to block out the independent promoters. One boycott, initiated by CBS in 1980, collapsed after radio airplay for new CBS singles was virtually non-existent and their artists pressured the label into hiring the promoters back.

The next attempt, in 1986, came after a TV documentary linked indie promoters to the Mob. The majors were forced to cut ties with the indies, but what happened? The majors made their artists pay the promoters directly - saved them money and kept their hands clean.

Here are some links to get you started:

Dannen, Fredric (1991), Hit Men: Power Brokers & Fast Money Inside the Music Business, Vintage Books, New York

Knoedelseder, William (1993), Stiffed: A True Story of MCA, the Music Business, and the Mafia, HarperCollins, New York
(this is an incredible book, read it!!!)

Boehlert, Eric (2001), Pay for Play, in: Salon.com, 14 March 2001, http://dir.salon.com/ent/feature/2001/03/14/payola/index.html [8.7.2004]

Boehlert, Eric (2002a), Will Congress tackle pay-for-play?, in: Salon.com, 25 June 2002, http://www.salon.com/ent/feature/2002/06/25/pfp_congress/print.html [8.7.2004]

Boehlert, Eric (2002b), Is Clear Channel selling hit singles?, in: Salon.com, 25 June 2002, http://www.salon.com/ent/feature/2002/06/25/eagle_eye/print.html [8.7.2004]

Boliek, Brooks (2003), Clear Channel CEO deflects pay-for-play blame, in: The Hollywood Reporter, 31 January 2003

Leeds, Jeff (2004), Paid 'ads' for song plays revive payola memories, http://www.chron.com/cs/CDA/ssistory.mpl/front/2621567 [8.7.2004]

gd, i wanted to clarify some things about the "radio wars" you mentioned above:

"In 1940, radio banned ASCAP, which was the RIAA of the day. The gave them what they asked for -- for 10 years, they stopped playing their music. Ten years after that, the labels were paying radio."

The ASCAP and the RIAA are completely different associations. The RIAA is an association of the record labels, e.g. the companies that produce the sound recordings.
The ASCAP is an association of the composers, e.g. the people that write the music. There is actually some rivalry between the two, in part because the ASCAP does get money from radio airplay from the contracts they have with the radio networks, while the labels (or the RIAA) does not get ANY money from radio airplay in the US.
(One of the reasons for that is that the ASCAP was founded in 1914, in time for the rise of radio, and the RIAA in the fifties (i think) - too late to extort money from the radio networks.)

Anyway, there is a very important lesson to be learned from that history.
The ASCAP forced the radio stations to pay more and more money during the 1930's.
Then, in 1940, they decided to DOUBLE these fees again, and that's when the radio stations revolted.
They refused to sign the new contracts, so the radio networks were not allowed to play songs by ASCAP composers anymore (the ASCAP view), or the radio stations boycotted ASCAP music (the networks' view).
So the music heard on radio changed almost overnight, from pop crooners to jazz and latin american music (which was license free to a large degree).
The ASCAP hoped for a public outcry, but people loved the new music!

The ASCAP boycott lasted for 6 months (not 10 years), then the ASCAP had agreed on new (much lower) fees with the radio stations.

Furthermore, the radio networks wanted more independence from the ASCAP and therefore started lining up their own composers and publishing rights catalogues, and founded the BMI as a direct competition to the ASCAP (in October 1939).

Transferring this strategy to today's world, it would mean the PC/hardware producers and internet providers setting up their own publishing rights organization and/or labels and then offer this content on their platforms for free.
Considering how much they profit from p2p that might be not the worst of moves.

From Canada:
http://www.cbc.ca/story/arts/national/2005/07/25/Arts/SonyPayola_050725.html
Sony BMG Music Entertainment will pay a $10-million settlement after an investigation by New York's attorney general uncovered a scheme that paid radio station employees to play certain artists.

"Radio stations are airing music because they are paid to do so in a way that hasn't been disclosed to the public," said the state's attorney general, Eliot Spitzer, in a news conference Monday.

Sony BMG issued a statement acknowledging some of its employees engaged in conduct that was "wrong and improper." The company agreed to hire a compliance officer to monitor its promotion practices.

The $10 million will be distributed to non-profit groups supporting music education and appreciation programs in the state.

Spitzer said air time for certain artists was "determined by undisclosed payoffs to radio stations and their employees."

Spitzer's investigators demanded documents, e-mails and other materials from several music companies including Warner Music, Universal Music Group and EMI as well as Sony. He warned his probe wasn't over: "These practices are pervasive."

The attorney general said his office found evidence Sony BMG paid for vacation packages and electronics for radio programmers. It also paid for contest giveaways, some operational expenses and hired independent promoters to pay radio stations to get more airplay for its artists.

Sony BMG Music is an umbrella organization of several record labels including Arista, Columbia and So So Def Records. Its artists include Aretha Franklin, Celine Dion, OutKast, Pink and Sarah McLachlan.

Spitzer lauded Sony CEO Howard Stringer and other executives for being "nothing but cooperative." About a dozen Sony BMG executives were let go during Spitzer's 11-month investigation, according to the Wall Street Journal.

Record companies are prohibited from offering financial inducements to radio stations under a 1960 U.S. federal law that made it a crime punishable by a $10,000 fine and up to a year in prison. The law was passed in response to scandals of the 1950s and early 1960s implicating some famous disc jockeys of the time. It was dubbed "payola" – a combination of "pay" and "Victrola" record players.

Spitzer has been in discussions with Jonathan Adelstein, the head of the Federal Communications Commission (FCC), about the problem.

"This is a potentially massive scandal," said Adelstein, who expressed interest in starting his own investigation.

"They refused to sign the new contracts, so the radio networks were not allowed to play songs by ASCAP composers anymore (the ASCAP view), or the radio stations boycotted ASCAP music (the networks' view)."

I had noticed these two competing slants, but didn't comment on it.

"The ASCAP hoped for a public outcry, but people loved the new music!"

That's not what ASCAP says:

"But while the public enjoyed ASCAP's growing repertoire, radio broadcasters grew reluctant to honor ASCAP license fees. In 1940, during negotiations with ASCAP over rates, the broadcasters formed their own competing organization as a ploy to drive their future costs for music down. But the public demanded ASCAP music and the broadcasters agreed to new rates."

"The ASCAP boycott lasted for 6 months (not 10 years)"

This is absolutely right. It just fell out of my brain like that. I have no excuse.

"The ASCAP and the RIAA are completely different associations."

I used to believe that, too. Their "rivalry" with the RIAA is just as fabricated as the rivalry between the labels. When their backs are to the wall, ASCAP gives the RIAA what they want. And ASCAP officials will lie directly to members in the process.

Look at the whole payola thing. This has been going on for decades. ASCAP hasn't bothered to complain about it, nor has BMI, although we know that this process of buying "spins" in the form of advertisements affects which songwriters receive income, distorting royalties and Grammy awards in the favor of those who play the game.

ASCAP, BMI, RIAA, NARAS, NAB -- They're all in bed together and we get the bastard children borne of this incestual relationship for entertainment. Don't buy into it and you don't exist. That's why when a record exec says your career is finished, you'd better find a day job.

I can't believe it took so long to expose this payola crap. I have personally witnessed the process . The part they don't mention is that the money that is paid to these so-called indy promoters comes out of the pockets of the recording artists themselves who stupidly believe their creations make it on the radio based on artistic merit. Seldom do they see a breakdown of expenses they have to recoup at 14 cents on the dollar. Nor does their manager tell them that they were charged 25 grand so KROQ would play their record for a week. Dont stop at fining the labels. Go after radio as well. If the user gets busted shouldn't the dealer feel the pinch too. Imagine a world were the DJ could play whatever he likes. That would be too real. I wonder if America could handle it?!

hi