Entercom, one of Eliot Spitzer’s biggest targets in the payola scandal, has settled with the New York State Attorney General’s office, agreeing to pay $4.25 million and make a number of reforms.
Country’s fifth-largest radio conglom will ban the practice of independent promoters, whom Spitzer had alleged were a fig leaf to cover up illegal payments from record companies. It will also hire a compliance officer to monitor how songs are chosen.
About $3.5 million of the settlement money will go toward nonprofit musical education programs, while an addition $750,000 will be used to pay legal costs. Company did not concede wrongdoing in the settlement.
The New York State Attorney General’s lawsuit had alleged that stations had accepted illegal gifts in exchange for airplay, while at the same time misrepresenting its choices to listeners. “Entercom has placed its airtime up for sale, and has concealed from listeners and reporting services the detrimental impact of its deceptive practices,” its complaint said.
Programs such as “CD Preview” and “CD Challenge” were created to cover up a pay-for-play system, in which free trips and other gifts were exchanged for airplay, according to the lawsuit.
Entercom owns more than 100 stations in mid-size markets such as Seattle, Sacramento and Providence.
Settlement brings the penalties Spitzer’s payola lawsuits have generated to nearly $40 million.
Entercom was sued after Sony BMG and Warner Music had earlier settled with Spitzer for a combined $15 million in the payola probe.
Universal Music and EMI Music North America subsequently also reached a settlement for a combined $16 million, with Universal paying more than $12 million of that figure.
In October, CBS Radio averted a lawsuit when they reached a settlement with Spitzer, agreeing to pay $2 million but also conceding no wrongdoing.
But Entercom was the first company to actually face a payola lawsuit from Spitzer.
Before the suit was filed last March, sources said the PA-based radio chain had been in negotiations with the NY AG, but talks failed after the two sides couldn’t agree on an amount.
At the time of the suit, insiders believed Spitzer was using Entercom as a trial balloon that could prefigure legal action against other radio targets, including industry titan Clear Channel and another heavyweight, Citadel Broadcasting.
Those lawsuits never materialized, though an investigation into those companies’ practices is thought to be continuing.
News also comes as Spitzer prepares to take office as governor of New York, leaving open the question of how his successor, former HUD secretary Andrew Cuomo, might handle ongoing and future investigations into payola.