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Sony BMG Spanked in Payola Investigation

As a result of investigations by New York state Attorney General Eliot Spitzer, Sony BMG Music Entertainment agreed Monday to pay $10 million and stop bribing radio stations to feature its artists.

Spitzer called payola — illegal payoffs for airplay designed to manipulate record charts, generate consumer interest in records and increase sales — “pervasive” in the industry and indicated the other major labels — EMI, Warner Music Group, Vivendi’s Universal Music Group — are also under investigation and could face similar penalties.

Payola “is driving the industry, and it is wrong,” Spitzer said. “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. This agreement is a model for breaking the pervasive influence of bribes in the industry,” he added.

Sony BMG — whose labels include Arista, Columbia, Epic, J, Jive, LaFace, RCA, Sony Music International, and So So Def — acknowledged in a statement that some of its employees had engaged in “wrong and improper” practices and that it looked forward to “defining a new, higher standard in radio promotion.” It also agreed to hire a compliance officer responsible for monitoring promotion practices, and to develop and implement an internal accounting system designed to detect future abuses.

Spitzer said SONY BMG officials cooperated fully with his investigators and promptly agreed to reforms when the problems were identified. He commended the company for taking steps that “should serve as a model for the rest of the industry.”

Federal and state laws bar record companies from offering undisclosed financial incentives in exchange for airplay. The FCC “requires that employees of broadcast stations, program producers, program suppliers and others who have accepted or agreed to receive payments, services, or other valuable consideration for airing material must disclose this fact to the broadcast licensee airing the material. This is required so that broadcasters have the information they need to disclose to their audiences that the material was paid for.”

Democratic FCC commissioner Jonathan Adelstein said, “It’s a real tribute to Attorney General Eliot Spitzer that he has blown the lid off a potentially far-reaching payola scandal … We need an immediate investigation to determine whether these practices violate federal payola laws. I’ve asked Mr. Spitzer to share all of the evidence that he has uncovered with the FCC.”

Sony, whose $10 million payment will be distributed to New York State not-for-profit entities to fund programs aimed at music education and appreciation, was accused of:

-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.

E-mail correspondence obtained during the investigation was damning. In discussing a bribe given to a radio programmer in Buffalo, one promotion executive at SONY BMG’s Epic Records wrote to a colleague at Epic:

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.

Another Epic employee who was trying to promote the group Audioslave to a Clear Channel programmer asked in an email:

WHAT DO I HAVE TO DO TO GET AUDIOSLAVE ON WKSS THIS WEEK?!!? Whatever you can dream up, I can make it happen.

A promotion employee unhappy with the times assigned for spins of the song “I Drove All Night” by Celine Dion wrote this internal email:

OK, HERE IT IS IN BLACK AND WHITE AND IT’S SERIOUS: IF A RADIO STATION GOT A FLYAWAY TO A CELINE [DION] SHOW IN LAS VEGAS FOR THE ADD, AND THEY’RE PLAYING THE SONG ALL IN OVERNIGHTS, THEY ARE NOT GETTING THE FLYAWAY. PLEASE FIX THE OVERNIGHT ROTATIONS IMMEDIATELY.

The investigation revealed that SONY BMG employees took steps to conceal many of the payments to individuals and radio stations, by using fictitious “contest winners” to document the transactions and make it appear as though the payments and gifts were going to radio listeners instead of station employees.

About Eric Olsen

Career media professional and serial entrepreneur Eric Olsen flung himself into the paranormal world in 2012, creating the America's Most Haunted brand and co-authoring the award-winning America's Most Haunted book, published by Berkley/Penguin in Sept, 2014.Olsen is co-host of the nationally syndicated broadcast and Internet radio talk show After Hours AM; his entertaining and informative America's Most Haunted website and social media outlets are must-reads: [email protected], Facebook.com/amhaunted, Pinterest America's Most Haunted.Olsen is also guitarist/singer for popular and wildly eclectic Cleveland cover band The Props.

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