http://www.latimes.com/business/la-fi-payola26jul26,0,5609660.story?coll=la-home-headlines
Paying a Price
Sony BMG reaches a $10-million settlement of allegations it bribed stations to get its songs on the air
By Charles Duhigg and Walter Hamilton
Times Staff Writers

July 26, 2005

When executives at Sony BMG needed to drum up support in 2002 for Jennifer Lopez's album "This Is Me … Then," they called the program director of a San Diego radio station and offered her a 32-inch plasma TV in exchange for adding the artist's songs to her play list.

Sony BMG Music Entertainment knew such payola, or "pay-for-play," was improper. Nonetheless, the company asked the programmer to provide a fictitious contest winner's name and Social Security number to cover up her involvement.

The station executive got her TV, and J-Lo got her spins.

The alleged exchange was disclosed in a treasure trove of e-mails, BlackBerry messages and other documents made public Monday by New York Atty. Gen. Eliot Spitzer. That electronic paper trail led the second-largest music company to a $10-million settlement.

Spitzer said Sony BMG executives offered "outright bribes" to radio programmers to make sure the company's artists got heard. Among the goodies Sony BMG gave employees of stations owned by Infinity Broadcasting Corp., Clear Channel Communications Inc. and others: airplane tickets, cash, vacation packages, PlayStation video game systems, DVD players and laptop computers.

In one e-mail that Spitzer released, a station manager who allegedly accepted gifts joked to Sony BMG executives: "I'm a whore this week. What can I say?"

Sony BMG, home to such artists as Tony Bennett and the Dixie Chicks, promised Monday not to pay radio stations in exchange for airplay. The company issued a formal statement acknowledging that "various employees pursued some radio promotion practices on behalf of the company that were wrong and improper." The company also fired an executive vice president of promotions at one of its labels.

Radio airplay is considered the most powerful promotional tool for record companies. Payola has plagued the music industry since the 1930s, with disc jockeys at times accepting cash, drugs or prostitutes in exchange forairplay.

At the news conference in his Lower Manhattan office, Spitzer said payola today was as widespread and "corrosive" as it was in the 1950s.

"It is omnipresent," Spitzer said. "It is driving the industry. And it is wrong. It reaches to the very top of the industry on the radio side and on the label side."

In 1960, Congress passed an anti-payola law banning broadcasters from taking cash or anything of value in exchange for playing specific songs unless they disclosed the transaction to listeners. Spitzer launched his investigation based on a similar law passed by the New York Legislature.

Spitzer's investigation continues at the other three major record companies — Universal Music Group, EMI Group and Warner Music Group — as well as at the country's largest radio corporations. Many industry insiders say the Sony BMG settlement could provide a template for agreements with other companies. Each company said it was cooperating with Spitzer but declined to comment further.

Documents released as part of the Sony BMG settlement depicted the seamier side of the music business, in which under-the-table payments and nudge-and-wink deals were so common that no one even tried to hide them.

"What do I have to do to get Audioslave on WKSS this week?!!?" a Sony BMG employee promoting the Audioslave song "Like a Stone" wrote to a Clear Channel programmer in 2003. "Whatever you can dream up, I can make it happen!!!"

Documents show that through its labels, which include Epic Records, Columbia Records and Sony Urban, Sony BMG routinely financed on-air contests in which stations gave away vacation packages, concert tickets and other items. In exchange, the company — whose involvement was not revealed to listeners — demanded not just spins of particular songs but airplay during the hours when the most people were listening. If they didn't get it, executives didn't mince words.

"OK, here it is in black and white," one frustrated Epic promotion executive wrote to a colleague after giving Las Vegas "flyaways" — or airplane travel packages — to radio station employees in exchange for playing Celine Dion's "I Drove All Night." If the stations played the song only late at night, the employee wrote, "they are not getting the flyaway." The e-mail also warned that programmers risked forfeiting the opportunity to play blackjack with Dion, who is based in Las Vegas.

According to Spitzer's office, Sony BMG also expended "significant resources" to manipulate call-in request lines, paying interns and others to repeatedly phone stations posing as listeners. To make sure the callers sounded authentic, Sony BMG employees issued specific guidelines.

"You need to rotate your people," an Epic promotion employee wrote last year in an e-mail to a call-in campaign leader. "My guys on the inside say that it's the same couple of girls calling in every week and that they are not inspired enough to be put on the air. They've got to be excited. They need to be going out, or getting drunk, or going in the hot [tub], or going clubbing…. You get the idea."

Spitzer took his sharpest aim at radio stations, saying they "are the ones most fundamentally who are violating the public trust."

According to e-mails released by Spitzer's office, senior staff members at Sony BMG's Columbia Records worried in 2001 that radio giant Clear Channel would boycott Columbia's releases unless the label paid more for airplay.

The e-mails suggest that employees of both Clear Channel and Infinity Broadcasting, the second-largest radio company, may have taken payments from Sony BMG in return for airplay. Spitzer has subpoenaed documents from both radio companies.

An Infinity spokesman declined to comment on the investigation. A Clear Channel representative said the nation's largest radio group was cooperating fully and that "allegations made today will be fully investigated and any wrongdoing will be met by swift and appropriate disciplinary action."

Spitzer's inquiry may also prompt an investigation by the Federal Communications Commission, which is responsible for enforcing payola laws. In an interview, Commissioner Jonathan S. Adelstein said he was calling for his agency to launch an inquiry, which could lead to revocation of radio licenses if illegal payments were substantiated.

"If it turns out there is massive and widespread violation of the rules, I don't see how we can't take extreme actions against the guilty licensees," Adelstein said.

The agency has extended limited oversight into payola issues and has imposed only one fine, for $8,000, in a payola case in the last decade.

Under the settlement, Sony BMG will work only with third-party promoters who promise to not offer inducements to radio employees. The company also agreed not to manipulate radio airplay charts by purchasing advertisements that include snippets of songs. That practice can drive up the "spin counts" used to measure a song's popularity.

The settlement won't ban all gifts. Sony BMG may pay for listener giveaways and give station employees concert tickets, modest personal gifts and meals costing as much as $150 per person.

The settlement also permits the company's artists to perform at radio-sponsored events, a practice some critics describe as "play-ola," because radio stations can sponsor huge concerts without having to pay the performing bands.

It was unclear how much the settlement would affect the culture of Sony BMG, a partnership between Japanese electronics giant Sony Corp. and German media company Bertelsmann.

On Monday, the company fired Joel Klaiman, executive vice president of promotion at Epic Records, for activities related to Spitzer's investigation. Company insiders said other employees were disciplined but expected no further firings as a result of the probe.

"Paying for songs has been almost standard operating procedure for years and years," said a Sony BMG executive who requested anonymity because he feared antagonizing Spitzer's office. "From this day forward, heads will roll. But, in terms of corporate scandals, we're talking about TV sets and trips to Florida. It's not Wall Street scandals."

Donnie Michaels of Miami's WHYI, one of the programmers identified in the e-mails, said he did nothing wrong.

According to the e-mails, Sony BMG employees knew Michaels so well that when making a hotel reservation one specified: "Make sure Donnie is not staying in a room too high, he has a fear of heights."

Said Michaels: "I was just doing what everyone else was doing."

*

To see e-mail files Spitzer's office released, see
http://www.latimes.com/media/acrobat/2005-07/18642226.pdf

From Digital Music News' Daily Snapshot:

Big Fallout Could Follow Payola Probe, Executives on Alert

As the Sony BMG dust cloud settles, the biggest action looks to be ahead.
Spitzer still has unfinished business with EMI, Universal Music Group, and
Warner Music Group, with all carrying payola baggage. According to label
insiders, the mood inside the majors is extremely stressed, with some top
executives fearing dismissals and even criminal charges ahead. The Sony BMG
penalty of $10 million is somewhat soft, leaving unanswered questions about
what may be happening behind the scenes. "Spitzer went easy on Sony, the
rumor is that this is a strategy to take down some very big people - think
president level," said one well-placed label executive to Digital Music
News. "So the label falls back on its clear anti-payola rules, and throws
its top guys under the bus. And it's more than people getting the ax, this
could be criminal". Already, top Epic radio promotion executive Joel Klaiman
is exiting the label, potentially the first of many.

Meanwhile, the settlement could be the start of a wider probe, with a ripple
effect now hitting the Federal Communications Commission (FCC). The FCC is
responsible for overseeing station licenses and compliance, leading Spitzer
to urge further review from the agency. With a paper trail now pointing to
rampant abuses by various stations, the FCC could widen the probe into a
federal action. "It took an attorney general's subpoena power to blow the
lid off a potentially far-reaching payola scandal," said FCC commissioner
Jonathan Adelstein. "Now it's incumbent on us to enforce our rules and
conduct a thorough investigation of each of the allegations."

Hmmm...and the people who use P2P are pirates?

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

And P2P isn't a powerful promotional tool? They pay tons o cash and risk legal problems for one form of distribution/promotion, and sue people for using another form. I don't get it.

Calling record execs crooks seems a little redundant, doesn't it? As for radio airplay.. maybe powerful, but not most powerful.. witness the explosion of "classic" tunes used in Idol shows...

A fine/settlement is such a copout. I wish there was something more could be done. Like execs getting community service orders.

My friend was a top-ranking staffer at FCC and I discussed three times the possibility that I would write a history of Clear Channel's crimes. He begged me to do it. Despite Adelstein and Copps' persistent comments on payola, NOTHING has happened at the FCC. Copps continues to obfuscate media consolidation issues with obscenity.

But front page payola coverage at NY Times and Wall Street Journal gives me hope that this scandal will grow in ever-widening ripples.

My reply to my FCC friend was, "Your payola investigation would turn on granting Witness Protection to an informer, some disgruntled indie promoter or station manager, and provide themn with FBI bodyguards."

Because millions of dollars are involved, the bent-nose guys with baseball bats will emerge.

The Department of Justice fumbled the last payola probe involving Mafia bad boy Joe Isgro. The LA DOJ Official was fired. The DOJ is all tangled up with the record business, it's a New Jersey thing.

Especially these days, when the Ashcroft first order of business was to create an IP Task Force, smash-and-grab goons in FBI wind-breakers who ransacked dorms and admin offices and carted away computers.

Let's take a look at a likely informer: Diana Laird of station KHTS in San Diego. Maybe an offer of Witness Protection will convince her to rat out a larger circle of criminals at Clear Channel.

The crimes at Clear Channel go all the way to the top of the White House, implicating Rove and Bush with Tom Hicks and Lowery Mays. This is the home of Limbaugh, Dr. Laura Schlessinger and Michael Savage, after all, and the history of the neo-con takeover will speak in admiring tones of the talk radio revolution (lies and smears.)

I would hope that Congressmen would avoid RIAA lobbyists like lepers. Run the other way! There is simply no upside to defending payola.

I'd like Senator(s) Feingold, McCain or Norm Coleman to hold a hearing. Get on it, boys. And while you're at it, reconsider the eternal copylockdowns the industry contniues to request.

Look at who's asking for it. Mafia thugs. Bag men.

"witness the explosion of "classic" tunes used in Idol shows..."

Have you seen the contract, Jazzmary? If you perform your own music on American Idol, they instantly own it.

--------

What talk radio has to do with payola is unclear, but I do agree with Tom that this is just the beginning. Or at least it should be just the beginning.

I used to think that there were some bad apples in the music business and if you were careful you could sidestep them. But the entire system is corrupt, from your local radio station all the way to NARAS.

Grammy awards go to the familiar, that which got all the airplay and resulting sales. I see a great deal of mediocrity in the current charts. How many of them would have never been played in the first place if it hadn't been for trips to Vegas or other payoffs?

Unfortunately, should this grow, sooner or later it will end up in front of a Senate Committee that is owned and operated by the record labels in exactly the same manner as they run the playlists at radio stations.

It's all about the Benjamins and that will never change. For the love of money...

This is a big story. I posted coverage from Canada on this one. And, George is completely right...it's all about the money...
"So it goes..."

I was saying---don't hold your breath waiting for the Republican Justice Department to do any investigation of Clear Channel. (Democrat) Russ Feingold sees this as an outrageous partisan issue. Spitzer is running for NY Governor on Democratic platform.

Waiting for 2006 is very difficult sometimes. I remember reading a conspiracy theory around the time of the elections that the reason Kerry came across in such a lackluster way during the campaign is that the two parties are actually one; that they put on a "show" for the people, to let us think we really have some say in our government. But in reality, the pols all knew who would win ahead of time. This almost sounds like the same thing, if I understand you correctly. First, the labels put out a record, then get it played over and over ad nauseam; that drives sales (we assume), and then that song wins a Grammy. Amazing. I guess sometimes the process doesn't work, but it would explain a lot of crappy Grammy awards. The process is rigged all the way...which really leaves no room for indies, does it?

I thought something would happen after Don Henley brought it up in the hearings on radio consolidation in Feb, 2003.

The FCC doesn't care about payola or they would have done something decades ago. Neither does anyone else, except maybe for the artists that are paying for it in the end. Then again, some of them know they wouldn't be on the radio if someone wasn't payinmg for it, so they'll never complain.

It's the people who listen to radio that need to find out what been going on ALL these years and begin to understand that this Payola is nothing more than brainwashing!!!!! Hearing the same song over and over again (now I sound like Nelly and Tim) and I even rhym it!!!! Brainwashing!!! When people learn the truth they will have to ask themselfs do I like this artists because their that damn good or have been become a brainwashed SHEEP !!!!!! WE at boycott already know the answer!!!!!!

edit/ or have I become a

I hope the FCC starts Ripping these stations after all PAYOLA is a two way street!!!!!!!

"The process is rigged all the way...which really leaves no room for indies, does it?"

ShadowMom, that says it all in a nutshell. (And, it is the defining reason Boycott-Riaa exists.)

hi

"It's the people who listen to radio that need to find out what been going on ALL these years..."

Funny thing is, they may already know and don't really care either. Radio is driven by the same thing everything else is.... MONEY. They make money by charging for ads based on their ratings. Lower ratings = less money. Solution: Stop listening to the radio.

I hope this story stays in the news. My son and husband saw it yesterday on the morning news and heard about it on the radio!

People have been complaining for years about the limited playlist on the radio. This should make them even angrier!
I agree with you, stilltrying!

I just read a good article about this on FoxNews. "The question now is: Who will take the fall at Sony for all this? It's not like payola is new. The government investigated record companies and radio stations in the late 1950s, and again in the mid-1970s. (When we were in high school, we used to laugh about how often The Three Degrees' "When Will I See You Again?" was played on WABC. We were young and naïve!)

Spitzer is said to be close friends with Sony's new CEO, Andrew Lack, who publicly welcomed the new investigations earlier this year when they were announced. Did Lack anticipate using Spitzer's results to clean house? Stay tuned ..."
http://www.foxnews.com/story/0,2933,163634,00.html

help bearshare!!

I saw a quote from Adelstein (FCC) that was really odd, in that he sounded like "We're shocked, yes, shocked to find paayola is going on. Gee, there's no way we can not file charges."

If I find the exact quot again, I'll post it, but it really sounded like not doing anything at all was the route the FCC preferred to take, but damn it, they can't ignore this one.

I called the FCC a couple of years ago with a payola question and was told the term was not in their database. No one at Orrin Hatch's office knew what it was either. Or the Senate Judiciary Committee.

The Senate Technology Committee knew.

Truedat, gdZiemann. I knew the idol puppets on tour owned nothing of their own.. I knew that from previous experience. As for Clear Channel.. they are 100% about the Curious, tho.. lately Air America and the Jones Network, Progressive radio outfits, are spreading using the Clear Channel stations.. so, Shadowmom.. go figure.. as for 2006 and the election.. do not wait.. get active and organize your block now.. that is what the neocons are doing daily and we need to do it, too.. Lachatte .. you watch Faux News??? YUK! If Spitzer is close friends with Andrew Lack.. they got the wrist-slap. Now lets see what, if anything, happens with the other three labels.. I say Spitzer for Prez, or at least US Attorney General!

INeedALover.. check Stephanie Miller on web radio.. she is righteous funny!!! That'll pick up your spirits.. if you can't stand listening on a Clear-channel station in your area..

Jazzmary: please! I found the article at Fox (faux) news when I did a search...
George: "Jonathan Adelstein, a Democratic member of the Federal Communications Commission, said Spitzer “appears to have found a whole arsenal of smoking guns.”

“We need to investigate each particular instance that Spitzer has uncovered to see if it is a violation of federal law. This is a potentially massive scandal,” he said.

The FCC has power over the nation’s radio stations, which are licensed to use public airwaves."
http://msnbc.msn.com/id/8700936/

Back in the early 1900's it was discovered that one of the baseball teams in the Worldseries that year had players who had been bribed to not perform well and to THROW the game so the other team would win!!!! Who can respect that????? Look what baseball did to correct the problem!!! Just ask Pete Rose!!!! How can you listen to the radio and not say "Gee I wonder how much the major label paid to get that song played on the radio"????? The FCC must act against these radio stations who have been involved with this PAYOLA SCANDAL!!!! Spitzer has already uncovered which radio stations were involved!!!! The FCC must act now and Yank them off the Air for a period of time and the stations involved pay some heavy fines and the radio stations must fire the ones involved. Only then will the music and radio industries get the message that this kind of PAYOLA B.S. will not fly anymore!!!!! When the FCC went after the Janet Jackson Titty Flash it was front page news!!!! This Payola scandal needs to become front page news!!!!! People who play Sports who are discovered to have CHEATED in some way to win are booted out of the game!!!!! Radio/Music labels/ Artists who CHEAT to get air play need to be booted out of the game!!!!! How would you feel if Tiger Woods was found to have paid off the other Golfers so he could win the Masters?????? I urge all here to write or E mail the FCC to demand that they take action NOW!!!!!! Only then will this scandal reach the music fans and just maybe the Sheep will turn into wolf's and hopefully turn against these labels and radio stations and DJ's and Program director's like they did in the 50's and put an end to this PAYOLA B.S. once and for all!!!!!!!!!!!!!!!!!!!!!!!!

DAMN I'm GOOD

Here's a follow-up at the NY Times

The settlement has reverberated widely. The program director of WRHT in Greenville, N.C., who was cited by Mr. Spitzer as having improperly received a $1,365 laptop computer, $912 in airfare and Playstation 2 equipment from a Sony BMG label, was fired at the end of his shift Tuesday, said Gordon Herzog, chief financial officer for WRHT's parent, Archway Broadcasting.

But in the end, even within the tighter restrictions, the major labels simply have more money and manpower to wheedle programmers into adding their music to broadcast play lists. The big players, far more so than their independent rivals, also have the wherewithal to build demand for their acts by subsidizing their tours and record-store advertising, producing music videos and landing them on television shows.

This imbalance in resources accounts, in part, for the disparity between sales and airplay in the music business.

The independent sector, which includes hundreds of labels that may specialize in genres from polka music to speed metal, and that sell music directly or through one of the bigger companies' distribution arms, accounted for an estimated 18 percent of new album sales in the United States so far this year, according to Nielsen SoundScan. Their combined share of the industry, as measured by these sales, is larger than that of two of the four big companies, Warner Music Group and EMI Group. The independents, however, command a far smaller share of the limited slots on play lists in major radio formats, as the Top 40 chart illustrates.

In case you didn't know it, here is a link for you to view some of the EVIDENCE on SonyBMG's payola scandal. I got this link from Billboard.biz. Bad Sony! Bad Sony!

http://www.oag.state.ny.us/press/2005/jul/payola2.pdf

If radio is so important, how come the independents, which can't get any radio airplay, have a bigger market share than Warner or EMI?