New York Attorney General Eliot Spitzer creates some waves as he settled the state's payola probe against Sony BMG Music Entertainment.
NEW YORK -- New York Attorney General Eliot Spitzer has settled the state's payola probe against Sony BMG Music Entertainment. Now, the radio and music industries, which felt they had already cleaned up their act, are left wondering what difference, if any, the settlement will make.
In the short term, Sony BMG's July 25 payola settlement is already making waves. Some Clear Channel program directors say they are now required to attach documentation to any merchandise received from labels, declaring it was not received in connection with providing airplay. And on July 26, Archway Broadcasting fired Blake Larson, music director of its top 40 station WRHT in Greenville, N.C. Spitzer said Larson accepted a $1,365 laptop computer, $900 in airfare and PlayStation 2 equipment from a label, in exchange for airplay of the label's artists.
Meanwhile, overnight spin programs -- in which labels buy commercial airtime to play their music, influencing chart positions -- are expected to be curtailed or conducted with greater transparency. At Sony BMG, a source close to the label says, spin programs are over.
Certainly, Sony BMG's promotion methods -- and the people conducting them -- are going to change. The day after the settlement, in which Sony BMG agreed to pay $10 million for pay-for-play improprieties, the label fired Epic promotion boss Joel Klaiman and reprimanded four other promotion execs.
The long-term success of Spitzer's campaign to clean up the promotion business will hinge on his ability to get other labels to settle for similar terms and to create measures for accountability and enforcement. At the press conference announcing the settlement, Spitzer expressed his desire for the Sony BMG settlement terms to become an industry standard: "I would hope what you are seeing will be viewed as the threshold that they all meet in due course."
Label sources say the remaining majors do not offer as compelling a trail of correspondence as the one Spitzer subpoenaed from Sony BMG. But, sources add, the attorney general likely has enough evidence to warrant a mass settlement with the recording industry.
Under the terms of Sony BMG's settlement, the label will bar employees from giving cash handouts to radio. Other giveaways and promotions, including travel and artist appearances, require written assurances from radio executives that the deals are not trades for airplay.
Indie promoters employed by Sony BMG are barred from distributing any items of value to radio station employees or listeners and cannot be reimbursed for gifts to radio-related parties.
In addition, Sony BMG will disclose all sponsored airplay to radio monitoring services; stop employees, interns and hired third parties from voting in call-in shows; create a database of all radio promotion expenditures; and provide annual reports to the Sony BMG board of directors and to Spitzer's office.
The label is screening candidates, subject to the approval of Spitzer's office, for a compliance officer to oversee these efforts.
For the time being, Sony BMG finds itself at a competitive disadvantage, as other labels continue to pursue some of the practices -- particularly spin buys -- targeted by Spitzer. The attorney general says investigations into the promotion practices of Universal Music Group, Warner Music Group and EMI are ongoing; the three companies have been cooperating with Spitzer's probe. Executives from all three declined to comment for this story.
Speaking on condition of anonymity, however, executives at each of the other major labels were initially flippant about the settlement. "This teaches us not to use e-mail," one exec quipped, referring to the damning, often incredible e-mail communications that Spitzer displayed at his press conference.
But the executives also acknowledged that the terms of the settlement, if applied and enforced, would dramatically alter the promotion game -- and many are just fine with that. "The labels for years have been asking for someone to take the gun out of their hand, because they keep shooting themselves with it," one longtime label promotion exec says of questionable promo practices. "Corruption is possible at any time, at any level, but for the first time it seems like the pieces are in place for reform to take effect."
Radio broadcasters in particular seem to be in the hot seat with Spitzer.
In announcing the Sony BMG settlement, Spitzer put major radio conglomerates "on notice" that they are failing in their duty to serve the public interest.
"They know what the law is, and they have been disregarding it willfully and pervasively," Spitzer said.
The New York Attorney General's office subpoenaed Clear Channel, Cox Radio, Infinity, Emmis and Entercom but took no action against any of these groups.
By mentioning the radio industry's stewardship of the public airwaves, Spitzer clearly meant to send a message to the Federal Communications Commission. Spitzer was candid about his desire for the Federal Communications Commission to expand its definition -- and scrutiny -- of payola, which falls under the agency's jurisdiction. In addition, for any long-term, meaningful reforms to result from Spitzer's investigations, radio and label sources polled by Billboard say, the FCC must take action.
So far, the agency seems to be paying close attention. FCC commissioner Jonathan Adelstein says Spitzer gave the agency "an arsenal of smoking guns" to ramp up federal enforcement against payola violations.
Adelstein, an outspoken advocate for such heightened enforcement, says he has asked Spitzer for "everything he's got" so that evidence uncovered in New York's pay-for-play probe can be evaluated for possible federal violations. Adelstein also notes that an e-mail trail now exists to justify a full-on federal investigation.
The FCC also is examining its sponsorship-identification rules and whether broadcast consolidation has enabled payola practices or other anti-competitive behavior.
"It took an attorney general's subpoena power to blow the lid off a potentially far-reaching payola scandal," Adelstein says. "Now it's incumbent on us to enforce our rules and conduct a thorough investigation of the allegations."
For now, no one is expecting pay-for-play to disappear.
Label and radio execs tell Billboard that those involved in the promo game will just find new ways of achieving similar results, and changes in the radio industry seem to underscore the difficulty of stamping out payola. Even as leading radio conglomerates and major labels disavowed the use of indie promotion -- the public face of payola tactics -- in an effort to establish their promotion efforts as legit, the labels stepped up with expensive promotion packages and spin-buy programs to gain airplay.
Spitzer -- determined as he is -- acknowledged as much in his press conference. "I feel a little bit like Bill Murray in the movie 'Groundhog Day,' where he relives the same case over and over again," Spitzer said. "This is a story that has been told many times."