Spitzer Hits Entercom With Payola Suit - Broadcasting & Cable

Spitzer Hits Entercom With Payola Suit

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New York State Attorney General Eliot Spitzer has filed suit against radio company Entercom Communications, alleging it traded airtime for pay.

Entercom sounds like it is ready to go to court.
"Entercom is a company that believes in playing by the rules and does so," the company said in a statement. "We have firm policies prohibiting payola and requiring compliance with the federal sponsor identification rules and we enforce them. 
"We have cooperated fully with the Attorney General's office in this investigation. Now that the Attorney General has filed this civil action we are confident that the issues will be fully and fairly resolved by the court."

It is the latest in a series of payola suits filed by the state. Earlier suits against music companies Warner Music Group and Sony BMG for paying for airtime were settled by the companies, but this one targets the other side of the equation, the stations that allegedly accepted the payola and played the songs.

Entercom is one of the top five radio station owners in the country, with stations in 20 markets: Boston, Seattle, Denver, Sacramento, Portland, Kansas City, Indianapolis, Milwaukee, New Orleans, Norfolk, Buffalo, Memphis, Providence, Greensboro, Rochester, Greenville/Spartanburg, Madison, Wichita, Wilkes-Barre/Scranton and Gainesville/Ocala.

Spitzer alleges that Entercom:

• "Traded air time for gifts and other payments;
• Traded air time for promotional items and personal trips;
• Solicited and accepted payments from record labels for air time;
• Instituted corporate programs, supported and directed by senior management, that sold air time to record   labels in order to manipulate the music charts."

Spitzer also asked the FCC to act on its current Payola investigation. "Almost a year after payola was exposed in significant detail, the FCC has yet to respond in any meaningful way," he said. "The agency’s inaction is especially disappointing given the pervasive nature of this problem and its corrosive impact on the entertainment industry."

Following the settlements with Warner and BMG, FCC Chairman Kevin Martin in August pledged to open the commission's own investigation, and Spitzer turned over documents from Warner and BMG to the commission.
A spokesman for the FCC chairman responded: "Chairman Martin is concerned about any violation of the payola rules and has directed the FCC's enforcement bureau to thoroughly investigate any evidence of payola rules violations brought before it.
Last summer and fall, he directed the enforcement bureau to review settlement agreements reached between the New York State Attorney General and Sony BMG and Warner Music and those investigations are currently pending at the FCC."

Democratic Commissioner Jonathan Adelstein, who has made the issue of adequately identifying paid programming something of  a cause in his second term, said:  "The New York Attorney General investigation is piling evidence on top of evidence of the widespread abuse of the public trust. Given the voluminous documents pointing to major, systematic violations of FCC rules, the penalties should be commensurate with the crime. We can't let any violators get away with a slap on the wrist."
Following the consent decress, Spitzer said he was not done with his ongoing investigation and had reportedly subpoenaed many of the top radio groups, some of whose stations had been cited in the evidence detailing the illegal practices.

Independently, Sen. Russ Feingold (D-Wis.) introduced a bill that would increase the penalties for payola, including putting a radio station's license at risk, though no action has been taken on it.

The Senate Commerce Committee is also expected to raise the issue in a general FCC oversight hearing, which was postponed from February until whenever a fifth commissioner is confirmed.

Despite the raft of Spitzer subpoenas to radio companies, reportedly including Clear Channel and Infinity, Clear Channel President and CEO Mark Mays said last fall that he did not see a "train wreck" coming on the issue of payola.

During a Progress and Freedom Foundation panel session in Washington in October, Mays said that his programming employees are required to acknowledge that they understand that payola is illegal, and that the 4-6 employees investigated in connection with the BMG consent decree were the bad actors, leaving 99.9% of its radio programmers doing what they should be doing.

David Solomon, former chief of the FCC's enforcement bureau, had a different take on the possible fallout from the ongoing investigation. In an op ed in B&C last August, Solomon said the payola settlements could trigger "a wave of aggressive FCC enforcement of payola and related sponsorship-identification rules."

The FCC has also been investigating the Armstrong Williams pay-for-TV-play deal with the the Department of Education.

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