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US: FCC to review payola settlement

by Brooks BoliekThe Hollywood Reporter
August 9th, 2005

The FCC's chairman on Monday ordered the commission's enforcement bureau to review the settlement New York reached with Sony BMG to end the state's investigation into payola allegations.

"The FCC has longstanding rules prohibiting payola," FCC chairman Kevin Martin said. "These rules serve the important purpose of ensuring that the listening public knows when someone is seeking to influence them. Broadcasters must comply with these rules. The commission will not tolerate noncompliance. While payola may not be a widespread practice in the broadcasting industry, to the extent it is going on, it must stop."

Last month, New York State Attorney General Eliot Spitzer announced a settlement with Sony BMG Music Entertainment relating to the major music company's radio promotion practices.

Sony BMG agreed to stringently modify its promotion guidelines and will pay a $10 million fine, as anticipated. The money will be distributed by the Rockefeller Philanthropy Advisors to nonprofit New York organizations.

The agreement is the first such arrangement reached as a product of Spitzer's yearlong investigation of promotion practices in the music business. The attorney general also has subpoenaed documents and deposed executives from the other majors: Universal, EMI and Warner.

Paying for airplay, which first came to light during federal hearings in 1959, is an abuse that has maintained itself over the years, Spitzer said when he announced the settlement.

Unlike Spitzer's, the FCC's investigation will target broadcasters as the commission is responsible for regulating their activity. Under the payola laws, broadcasters are required to explicitly disclose at the time of the broadcast who paid for or promised to pay for its airing. If it is not disclosed, the broadcasters can be fined or lose their license.

The commission could also go after the record companies. In a little-used proceeding, the FCC has the power to fine non-licensees, but only on the second offense. On the first offense the commission must warn the violator that he's doing something wrong.

"If the (enforcement) bureau determines violations of the payola rules have occurred, the commission will take swift action," Martin said. "In addition, if the bureau is presented with evidence of payola rule violations outside of the Sony BMG Music Entertainment settlement, it is to thoroughly investigate those complaints as well."

FCC commissioner Jonathan Adelstein was pleased by Martin's decision. Adelstein has been the most vocal commissioner on the payola issue.

"The airwaves belong to the public, not the highest bidder," Adelstein said. "The vitality of radio is sapped when music is selected based on bribes rather than merit. Radio listeners are deprived of hearing the freshest music, local artists and creative genius because the labels are predetermining what they get to hear -- and paying to get it played."

According to the agreement with Spitzer, Sony BMG illegally provided radio stations with financial benefits to obtain airplay and boost the chart position of its songs. The company's activities included outright bribery, mounting free concerts and giveaways, making payments to cover station operations expenses and using independent promoters as conduits for illegal payments.

The document names some beneficiaries of Sony BMG's illegal largesse. Dave Universal, who was fired in January from his post as program director at WKSE in Buffalo, N.Y., received trips to New York, Miami and Fort Lauderdale, Fla., in return for playing singles by Jennifer Lopez, Good Charlotte and Franz Ferdinand. Programrs in New York, San Diego, Albany, N.Y., and Milwaukee also are cited.

The agreement says independent promotion firms served as a principal conduit of "pay-for-play" money between Sony BMG and radio stations, but noted that senior executives within the Sony BMG labels' management team knew what was going on.





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