NEW YORK — Sony BMG will change its radio promotion practices of paying for airtime with cash, trips and merchandise, and appoint a compliance officer to monitor the label’s marketing as part of an agreement with New York state attorney general Eliot Spitzer that includes a $10 million payment to a charity.
The world’s second-largest music conglom acknowledged Monday that some of its employees pursued radio promotion practices that were “wrong and improper,” including offering cash payments to radio stations for the airing of songs.
Sony BMG is the first scalp claimed by the attorney general in a wide-ranging payola probe that includes the other music majors — Warner Music Group, Universal Music Group and EMI Group — as well as radio congloms such as Clear Channel and Infinity Broadcasting. Spitzer said payola is pervasive in the industry.
“Our investigation shows that, contrary to listener expectations, 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,” Spitzer said.
The settlement has also sparked a call for a federal inquiry. FCC commissioner Jonathan Adelstein has asked Spitzer to hand over his evidence so it can be evaluated for possible federal violations.
“We’ve seen a lot of smoke around payola for a while, but now we know it’s coming from a real fire,” he said in a statement. “It’s time to dump a bucket of cold water on it.”
Spitzer said the payola uncovered by his office took many forms, including outright bribes to radio programmers, payments to stations to cover operational expenses, the retention of “independent promoters” or middlemen to make illegal payments, and payments for “spin programs” for airplay under the guise of advertising.
As part of the settlement, Sony BMG agreed to restrict gifts to radio station personnel to CDs, concert tickets, personal gifts for life events or holidays valued at less than $150 per year.
The agreement requires Sony BMG to have all travel and lodging perks approved by a compliance officer, and the label must keep a five-year database of gifts given to radio station employees.
The compliance officer will supervise a training program for all Sony BMG’s promotions departments and establish a hotline to field complaints.
While the term “payola” evokes the pay-for-play scandals of the ’50s, the evidence uncovered by Spitzer doesn’t quite have the headline-grabbing scale of the recent multibillion-dollar corporate frauds that have brought prison sentences for corporate crooks.
For example, documents show a promotions exec with Sony BMG’s Epic Records gave a $4,000 Miami trip in 2004 to former Buffalo WKSE programmer Dave Universal and three friends in exchange for playing Franz Ferdinand’s single “Take Me Out” on the radio.
The same programmer agreed to throw in a Gretchen Wilson song for an additional $750.
The Epic execs discussed their misgivings about doing business with the programmer, but went ahead with them anyway. “I just think (it’s) bad business that we swore not to do again,” an Epic exec wrote in an email.
The payments to radio promoters were disguised as “contest giveaways” so as not to raise flags in Epic’s accounting system.
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.
Epic instituted a payments schedule, forking over, for example, $1,000 to any station in the top 23 markets that played a song 75 times in a week.
Spitzer singled out Sony BMG’s Sony Urban as an example of a label where pay-for-play deals are “part of the mindset.”
One email provided by Spitzer recounts how the label planned to ascertain the shoe size of certain DJs so Adidas sneakers could be sent to each after they’d played a song at least 10 times. Another email indicated it cost Sony’s Epic Records $4,000 in airfare and hotel costs to get Franz Ferdinand on Buffalo’s WKSE.
Soon after the payola probe began, Sony BMG’s inhouse counsel uncovered a plan by Sony Urban to send Michael Saunders, program director at Clear Channel’s WWPR in New York, a plasma TV in exchange for airplay.
Maintaining middle men
The agreement with Spitzer doesn’t preclude Sony BMG from hiring independent promoters to flog songs to radio, but prohibits using them as a conduit to deliver cash, merchandise or other bribes.
The attorney general chose to settle with Sony BMG to set a precedent for other labels and radio congloms, which are still under investigation.
Spitzer’s office said Sony BMG cooperated fully with the investigation. While all the majors were asked to supply memos and other paper work, only Sony execs have been interviewed.
The music company declined to comment beyond a Spitzer-approved statement admitting wrongdoing and pledging to follow a “new, higher standard in radio promotion” in the future.
Evidence turned up during the inquiry points to specific wrongdoing by Sony BMG employees, but a spokesman declined to comment on whether it would result in any firings.
The $10 million fine Sony BMG agreed to pay will go to the Rockefeller Philanthropy Advisors, which will distribute the funds to nonprofits for programs aimed at music education and appreciation.