After extracting millions in settlements from record labels, New York state Attorney General Eliot Spitzer is turning his firepower on the radio biz.
Prosecutor has filed a wide-ranging suit against the Entercom radio chain, accusing it of accepting what are essentially bribes in exchange for airplay.
“Entercom has placed its airtime up for sale, and has concealed from listeners and reporting services the detrimental impact of its deceptive practices,” the complaint reads.
Last year two labels, Sony BMG and Warner Music, settled with Spitzer for a collective $15 million after a period of investigation and negotiation over payola. Two other labels, EMI and Universal, are thought to still be under investigation.
But this is the first payola investigation where a lawsuit was actually filed — and first instance where a radio-station chain has been targeted.
Suit offers in sharp detail alleged instances of payola, including a memo circulated to Entercom stations requiring them to meet payment targets from labels as well as independent promoters, who have allegedly been used as a fig leaf to cover up illegal cash exchanges.
The complaint demands that Entercom halt all cited practices and pay a litany of fees, including penalties and ill-gotten gains.
Paying cash for airplay has been illegal since the 1950s. In his wave of investigations, Spitzer has alleged that payments now come in disguised –but no less egregious — forms, including trips and bonuses paid to station staffers.
The Pennsylvania-based Entercom, which owns stations from Boston to Sacramento in a range of formats, is the country’s fifth-largest chain, and suit is likely a harbinger of cases against even bigger radio players.
Spitzer’s office confirmed that other investigations could be forthcoming.
“The fact that we’re announcing this doesn’t mean we aren’t looking into a lot of other cases,” assistant attorney general Maritere Arce told Daily Variety. She noted that the A.G.’s Office was still committed to “looking at both sides of the equation” — labels and radio stations.
Complaint also claims that Entercom stations were expected to earn money through programs known internally as “CD Preview” and “CD Challenge.”
Those programs, it claims, were merely disguised ways of soliciting money for airplay, which labels would pay because it helped their Billboard ranking.
“Entercom has created a scheme by which it sells record labels the use of its airwaves for the purpose of deceiving the public and inflating songs’ chart positions,” the complaint read.
Entercom declined to comment on the lawsuit, though a rep issued a statement that read, in part, “The company believes in playing by the rules and does so. We have firm policies prohibiting payola and requiring compliance with the federal sponsor identification rules and we enforce them.”
One Entercom programming director cited in the complaint, former Buffalo-based Dave Universal, has been let go.
Spitzer had made corporate malfeasance — especially instances of payola — a linchpin of his professional reputation as well as his New York gubernatorial campaign. He also recently sent subpoenas to labels over what are reportedly concerns about price fixing for downloadable music.
Sources say Entercom was slapped with this suit after a period of failed negotiation with Spitzer.
Music-industry insiders noted that the fact the attorney general filed a lawsuit instead of settling suggested a wide gulf between Spitzer and the company.
If a trial went forward, it would create a public forum for music-industry wrongdoing at the same time Spitzer was in the heat of a political campaign.
One music-biz exec called this suit “the next chapter” in the attorney general’s crusade “at a time when the previous chapter hasn’t even closed.”
Dynamic between stations and labels have sometimes taken the form of vicious cycle: Labels have accused stations of threatening them if payments weren’t made while stations have maintained that labels were more than happy to offer unsolicited money.