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Biz left to sing the blues

Majors mull who's next after top N.Y. cop puts hit on radio

Payola has reared its ugly head again.

New York Attorney General Eliot Spitzer slapped Sony BMG with a $10 million fine, ordered the conglom to alter its radio promotion practices and hire a compliance officer.

Within 24 hours of the announcement on July 25, a top level Sony promotion exec was out of a job, radio and music execs were wondering who’s next and rumors began flying about fines, whistleblowers and pink slips.

And the FCC’s Jonathan Adelstein asked Spitzer to hand over evidence so it could be evaluated for possible federal violations.

The evidence Spitzer is turning over to the FCC on Sony BMG alone points to violations at 50 to 60 radio stations, “which are squarely in our jurisdiction,” FCC staff attorney Rudy Brioche says.

Because anti-payola statutes were written into federal law, the long arm of the FCC could reach from the licensed radio stations to the independent promoters to the labels, or anyone else who participated in the payola scheme.

Adelstein is trying to convince the full commission to take on the payola case, which could result in an $11,000 fine and a year in prison for each violation. As far as a broadcaster is concerned, the ultimate penalty is the forfeiture of the license.

Seeking to downplay the probe, there was no shortage of record company execs saying it was much ado about nothing — a few concert tickets, some TVs, hotel rooms and plane trips.

Addressing an industry that coined the term “hookers and blow” as the cost of creating hits, Spitzer’s announcement — that “Songs are not selected for airplay based on artistic merit and popularity. Airtime is often determined by undisclosed payoffs to radio stations and their employees.” — had the effect of Captain Renault’s faux-incredulous discovery of gambling in Rick’s Cafe.

The AG’s office is not tipping its hand as to what the next step is, but music execs believe Universal will be the next target, and Spitzer is bringing an even more damaging portfolio of evidence into settlement talks.

Many believe that fines will be doled out according to market share, much like the fines assessed after the FTC’s probe of minimum advertised pricing practice of the mid-1990s.

Evidence released by Spitzer’s office mostly concerned acts at Sony Music’s labels in 2002 and 2003. (Sony and BMG merged last year.)

Emails from promotion execs up to the executive VP level spelled out the costs for added spins — a Jennifer Lopez single required $3,600 in payments to bump it just 63 spins in one week — as well as flights to Las Vegas for radio execs to see Celine Dion perform.

Spitzer singled out Sony BMG’s Sony Urban as an example of a label where pay-for-play deals are “part of the mindset.” A former radio exec tells Variety, “Urban radio is 10 times dirtier than pop. There’s a handout for cash at every turn, and they ask for ridiculous sums.”

“This is low-hanging fruit,” says a former veteran record promoter who worked for diskeries well as radio stations. “For the last 15 or 20 years, this was common practice for just about every (breaking artist’s) record that got added to a station’s rotation.”

The iniquitous relationship between diskeries and radio stations dates back to the late 1930s; Variety coined the term “payola” in 1938.

A hubbub arose in the 1990s over the independent promoters who were getting bales of cash from both sides of the business; the profession was largely discredited, and when Clear Channel had an ample empire, it cut ties with the indies, choosing to deal directly with record companies.

July 25 was the first time anyone connected with the investigation had a chance to see what kind of evidence Spitzer would bring to the table.

Clear Channel is poring over the documents to determine if anyone at the conglom violated its strict payola policies. “If there is wrongdoing found, there will be firings,” a spokeswoman says.

Soon after it banned indie promoters in 2003, the radio group started requiring employees to sign an agreement that they won’t engage in any pay-for-play schemes, she says.

Clear Channel has received a subpoena from Spitzer’s office and says it is cooperating fully with the investigation.

Spitzer’s evidence shows a considerable number of dealings with East Coast stations in secondary markets, which a record promoter said are more easily bought than stations in Los Angeles or New York. When the tallying system changed about 10 years ago and record plays were not weighted according to the size of a station, a spin was a spin, with total spins being the crucial number.

Record companies have been taking Spitzer’s probe seriously since it began. Sony BMG revamped its radio practices seven months ago and was redoing them last week. Universal brought together every employee working in radio promotion about six months ago and spelled out the do’s and don’ts.

EMI, in its recent annual report, noted that it had co-operated with Spitzer’s inquiry and “reaffirmed internally in early 2004” its written policy prohibiting unlawful radio promotion practices.

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