The illicit relationship between the record labels and terrestrial radio

It never exactly made sense that satellite radio had to pay fees to the labels and terrestrial didn't. Now, of course, we know why. They were getting it "under the table". Perhaps resolution of the "Payola" scandal will level the playing field and shift part of the burden to the "free" radio stations.

EMI Agrees to Fine to Resolve Payola Case
New York Times, June 16, 2006
By JEFF LEEDS
The EMI Group, the music giant, agreed yesterday to pay $3.75 million to resolve accusations of paying radio programmers to play specific songs, becoming the last of four major companies to reach a settlement as part of an investigation by the New York attorney general.

The office of the New York attorney general, Eliot Spitzer, which announced the settlement yesterday, released e-mail messages and other documents showing that EMI executives agreed to give radio programmers Rolling Stones tickets or offered direct cash payments to stations for airplay of specific songs. Federal and New York state laws prohibit broadcasters from accepting payments of cash or anything of value unless the arrangement is disclosed to listeners.

EMI, the smallest of the four major companies in terms of sales of new releases in the United States, offered an acknowledgment that echoed its rivals. The company said certain employees had "engaged in some promotional activities that were wrong and inappropriate." EMI also agreed to a series of changes, including a prohibition on providing cash for use in radio contests. The company had instituted stricter policies on its promotion practices last year after Mr. Spitzer, who is running for governor of New York, started his inquiry.

As with earlier settlements, Mr. Spitzer said senior EMI executives were often aware of the practices, which included arranging a concert in exchange for airplay or staging fake requests to radio station call-in lines. In one instance cited by Mr. Spitzer's office, an executive at EMI's Capitol Records label sent an e-mail in June 2002 informing the general manager that a song by the Baha Men would be played three times a day in exchange for a concert.

The label "just got WBLI to commit to three times a day by giving them a show," according to the e-mail, which was circulated to other executives. Other documents show EMI and radio executives discussing exchanges to obtain airplay for acts like Beenie Man, Skye Sweetnam and Gorillaz.

The settlement was the latest salvo in Mr. Spitzer's effort to shed light on the murky world of radio promotion, a corner of the industry where executives jockey for an edge in determining which songs are heard on the air. Even as Internet services gain popularity, radio airplay is regarded as the biggest driver of CD sales.

EMI's settlement comes a month after the Universal Music Group, the world's biggest record company, agreed to a similar deal for $12 million. Last year, Mr. Spitzer announced settlements with Sony BMG Music Entertainment and the Warner Music Group, who settled for a combined $15 million.

With inquiries into the conduct of the four record giants now resolved, state investigators are expected to focus on large radio corporations, including CBS Radio and Clear Channel Communications. Mr. Spitzer filed a lawsuit against one broadcaster, Entercom Communications, in March after settlement discussions foundered. The Federal Communications Commission is seeking documents from the broadcasters in connection with its own payola inquiry.

Documents released yesterday indicated that payments from record companies could take many forms. Mr. Spitzer said EMI executives would explain the availability of "promotional support" to stations, and radio personnel conveyed that providing such support would result in increased airplay. EMI would then cover costs that the stations incurred for items like production of station jingles and "party buses."

At the same time, executives developed tactics to deceive radio programmers into believing a song was popular. In a 2002 e-mail message, for example, an executive at Virgin Records, another EMI label, provided instructions to generate false requests for a Norah Jones song, saying the callers should indicate they heard of the artist through a friend or television show. "Please make sure the callers are women 20-28 years old," the e-mail said. "And please make sure they don't get caught."

6/16/2006 12:21:00 PM

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