Sony Settles Payola Investigation

On July 25, New York State Attorney General Elliot Spitzer announced that Sony BMG Entertainment had agreed to "stop making payments and providing expensive gifts to radio stations and their employees in return for 'airplay' for the company's songs."

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."

In addition to paying a $10 million fine (earmarked for music education programs), Sony BMG acquiesced to an Assurance of Discontinuance, in which the company agreed to stop making payoffs in return for airplay and to fully disclose all items of value provided to radio stations in the future. In addition, the company agreed to corporate-wide reforms, including hiring a compliance officer to monitor promotion practices and develop and implement an internal accounting system designed to detect future abuses. This is the first time a record label has agreed to such sweeping reforms.

This is not the first time record labels have been caught cooking the books with radio stations. The first payola scandal followed on the heels of television's game show scandals in the 1950s. The first conviction was that of Alan Freed, who was convicted in 1960 of accepting $2500 from a record company. Freed always maintained that the money was a token of gratitude and did not directly affect record rotation, but the incident effectively ended his career.

Frederic Dannen wrote a book-length exploration of payola, Hit Men: Power Brokers and Fast Money Inside the Music Business, which illustrated that payola—like rock'n'roll—never died. In 1980, Dannen reported, Pink Floyd was popular enough to sell out entire concert tours in a matter of hours, but still could not get airplay for its singles without resorting to "independent promoters," whose primary job was to provide the record labels with "plausible deniability" should their payments to radio station programmers ever be made public.

Payola in 2005, according to Spitzer's office, included such practices as:
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," or airplay under the guise of advertising.

There were several major revelations in the AG's announcement. The first was how cheaply so many radio people could be bought—in Hit Men, Dannen reported that the labels were all too willing to believe that radio programmers could be bribed, but were stunned to discover how little actual cash it took. An internal Sony email revealed that one station manager was demanding a "flyaway to a Celine [Dion] show in Las Vegas" in exchange for heavy rotation of Ms. Dion's single.

Another shock was how open all of this was. Spitzer's office released over 60 pages of email correspondence (even via Blackberry) and internal memos documenting the illegal practices.

The biggest surprise, however, was how ineffective the bribery was. Radio stations weren't being paid to promote unknown acts, but rather the company's big stars, such as Ms. Dion, rock group Franz Ferdinand, and the ubiquitous J-Lo. Even then, radio play for some acts declined after it was bought and paid for. (To paraphrase H. L. Mencken, an honest programmer is apparently one who, once he's bought, stays bought.)

What does all this mean? That all depends on who you ask. Some industry observers say that it won't change much, since the biggest broadcast chains, Cox Radio and Clear Channel, cancelled all connection with independent promoters before Spitzer even began his investigation. Don Rose, president of the American Association of Independent Music, said, "This sounds to us like something that will be very helpful. It's obvious to us that we're not getting the fair share because of the embedded relationships with big radio."

Don Henley, founding member of the Recording Artists' Coalition, said, "There's no question that payola hurts recording artists."