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Sony to Stop Paying Radio Stations, Will Pay Penalty

Posted on: Monday, 25 July 2005, 21:00 CDT

Jul. 26--New York State Attorney General Eliot Spitzer put a $10-million dent on Monday in the budget of one of the world's biggest music companies, Sony BMG Music Entertainment.

Sony BMG agreed to stop paying radio stations across the nation -- both the businesses and employees -- to feature its artists' recordings on air. And the $10-million fine will be distributed to not-for-profit entities and earmarked for music education programs, Spitzer said. Spitzer, a Democrat who is viewed as the most energetic New York state legal official since organized crime buster Thomas Dewey in the 1940s and a possible gubernatorial candidate -- used his investigative muscle to win an assurance of discontinuance before court involvement. It was similar to a no-contest plea when formal charges are filed. It is a tacit admission of wrongdoing.

The probe harkened back to the 1950s payola scandal where some disc jockeys accepted bribes for playing records. Such pay-for-play is illegal under bribery statutes.

Sony BMG, whose many labels are home to artists such as Usher, Bruce Springsteen and Britney Spears, also apologized for its practices and agreed to hire a compliance officer.

Meanwhile, federal action might loom. Jonathan Adelstein, a member of the Federal Communications Commission, said: "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."

How did the payoffs work?

Lou Kasman, an Ann Arbor-based media consultant, was not involved in this specific case, but said recording companies like Sony BMG often hired independent record promoters. Despite that tag, Kasman said, they were hardly independent. The recording companies paid them to approach radio stations, usually to ask for a weekly meeting with the programmer or music director, ostensibly to review what the station has played.

In return for that time and access, the independent promoter offered to deposit recording-company money in an account that could be used to buy station promotion items -- tickets to live shows, CDs to give away on air, travel and accommodations for station officials to trade events and elsewhere -- and sometimes more. The payments were never booked as revenue; the assumption was that the station would play the songs the independent promoter represented to keep the cash flowing.

In other instances, artist advertising was purchased with tacit assurances tunes would get airplay.

Those practices flew in the face of popular belief that recordings received airplay solely on artistic merit. The effect was that small labels and new artists without promotion support were largely shut out.

Sony spokesman John McKay said: "Despite federal and state laws prohibiting unacknowledged payment by record labels to radio stations for airing of music, such direct and indirect forms of what has been described generically as 'payola' for spins has continued to be an unfortunately prevalent aspect of radio promotion. Sony BMG acknowledges that various employees pursued some radio promotion practices on behalf of the company that were wrong and improper."

But Dick Kernen, a longtime Detroit radio executive now with the Southfield-based Specs Howard School of Broadcast Arts, noted that radio management consolidation, where music decisions are made by fewer local executives, has greatly eroded the indie promoters' sway over play.

Several Detroit radio executives queried declined comment.

The Associated Press and FMQB.com contributed to this report.

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Source: Detroit Free Press

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