Sony BMG Music Entertainment agreed to end “payola” schemes and pay $10 million USD to end a year-long investigation.
The pay-for-play scams of the late 1950s damaged DJ Alan Freed’s career and nearly ended Dick Clark’s before it started. But variants of those deals, where a record label would pay a DJ to play songs by particular artists, never really went away.
The presence of “payola” laws since the 1960s weren’t enough to deter Sony BMG from trying to get its artists more airtime. New York Attorney General Eliot Spitzer’s office began investigating Sony BMG in 2004, acting on tips provided by industry insiders.
“Our investigation shows that, contrary to listener expectations that songs are selected for airplay based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees,” Mr. Spitzer said in a statement. “This agreement is a model for breaking the pervasive influence of bribes in the industry.”
That investigation found company executives aware of the various payoffs and inducements, and of the benefits from them. Those extra considerations offered for airplay, which were illegal under federal and New York state law, were detailed by Mr. Spitzer’s office in a press release:
• 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.
Executive emails discussed money paid to a Buffalo programmer in exchange for more airplay:
“Two weeks ago, it cost us over 4000.00 to get Franz [Ferdinand] on WKSE. That is what the four trips to Miami and hotel cost . . . At the end of the day, [David] Universal added GC [Good Charlotte] and Gretchen Wilson and hit Alex up for another grand and they settled for $750.00. So almost $5000.00 in two weeks for overnight airplay. He told me that Tommy really wanted him to do it so he cut the deal.”
Sony BMG has agreed to several changes in its business practices. It will stop paying for airplay, and will fully disclose the value of items it provides to radio stations. In a first for the entertainment industry, Sony BMG will hire a compliance officer to oversee promotional activity, and will implement internal accounting controls to monitor promotions for abuses.
Mr. Spitzer indicated that Sony BMG cooperated fully with the investigation, and that his office will continue its investigation of payola practices in the recording industry.
David Utter is a staff writer for Murdok covering technology and business. Email him here.
