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US: Broadcasters Agree to Fine Over Payoffs

by Jeff LeedsThe New York Times
March 6th, 2007

Radio broadcasters have long been accused of corrupting the public airwaves by accepting bribes from corporate music giants.

But in a pair of agreements disclosed yesterday, the broadcasters moved to resolve accusations that they had auctioned off the airwaves by agreeing to pay a landmark penalty and pledging to play more music from independent recording artists.

Under a tentative settlement with the Federal Communications Commission, four of the largest radio station owners have agreed to pay a total of $12.5 million to resolve claims that they accepted cash and other incentives in exchange for playing songs — a practice popularly known as payola.

If approved, the settlement would rank as the biggest penalty ever imposed at one time by the F.C.C. — at least until the agency levies another proposed fine, $24 million, against Univision, the Spanish broadcasting giant, which is accused of sidestepping its obligations to supply educational programming for children.

The new penalty, which would come as part of a consent decree with the radio companies — Clear Channel Communications, CBS Radio, Entercom Communications and Citadel Broadcasting — would reflect perhaps the toughest F.C.C. enforcement of the decades-old regulations that prohibit broadcasters from taking secret payments in exchange for playing specific songs. Critics have accused the agency of lax enforcement.

The agency chairman, Kevin J. Martin, said, “I hope it sends a strong message to the industry that we will be enforcing these rules.”

The F.C.C. started formal investigations of the radio companies last year after disclosures that radio programmers accepted gifts, luxury trips and other enticements surfaced as part of an inquiry led by Eliot Spitzer, then the New York attorney general.

Mr. Spitzer reached a series of settlements with the four major music conglomerates — the Universal Music Group, Sony BMG Music Entertainment, the EMI Group and the Warner Music Group — totaling more than $30 million. CBS Radio and Entercom settled cases with Mr. Spitzer’s office for a combined $6.25 million.

The settlement with the F.C.C. comes at the same time as a separate arrangement in which the broadcasters agreed to devote more time to playing artists who are not signed to contracts with the four big record companies.

The deal, negotiated by the American Association of Independent Music, provides that the radio companies will broadcast the equivalent of 8,400 half-hour segments of music from such artists. The segments can run any time from 6 a.m. to midnight any day of the week, according to people briefed on the deal.

Representatives for the broadcasters declined to comment on the proposed settlements in detail.

Andrew W. Levin, Clear Channel’s executive vice president and chief legal officer, said: “While no violations were found, we are pleased to announce that Clear Channel has agreed to settle this longstanding payola investigation with the F.C.C. We believe it is time to close the door on this ongoing inquiry and move forward.”

The deal appears to close an embarrassing chapter for the music and radio
industries.

Mr. Spitzer’s inquiry disclosed how such payments had become widespread as label executives pressed to obtain exposure for stars. In some cases, label executives offered payoffs directly; in others, they hired middlemen known as independent record promoters, to funnel gifts or other enticements to radio station personnel.

Many terms of the proposed consent decree mirror those in the settlements with Mr. Spitzer’s office. Under the three-year term of the F.C.C. deal, the broadcasters would tighten their policies governing the contact of their programmers with record labels, including limits on gifts they could receive.

As for the independent labels, Peter Gordon, who negotiated the separate arrangement on behalf of the independent labels, said radio programmers had been making decisions in a “climate of fear” after Mr. Spitzer’s inquiry, adding fewer new songs and all but shutting out small independent labels.

Mr. Gordon said that under a set of “rules of engagement” planned as part of the separate agreement with stations, programmers could now listen to lobbying efforts by certain independent promoters working on behalf of independent labels.

Smaller labels should be permitted to lobby for access using “proper professional honorable working relationships,” said Mr. Gordon, owner of an independent label called Thirsty Ear Recordings.

Some industry officials were skeptical that the new arrangements would result in a noticeable change for either artists or listeners.

Paul Porter, a former radio programmer who now runs Industry Ears, a Washington-based media research organization, said that compared with the settlements extracted by Mr. Spitzer, the F.C.C. settlement “basically lets the four biggest companies off the hook for peanuts.”

Mr. Porter said he did not believe that the separate pledge to broadcast more independent music would amount to much.
“It sounds great, but it’s business as usual,” Mr. Porter said. “Only a fool would believe differently.”





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