Post by plannine on Mar 12, 2006 20:17:29 GMT -5
N.Y.'s Spitzer sues Entercom in payola probe
By Chris Morris (Hollywood Reporter)
In the first such action resulting from his investigation into music business payola practices, New York State Attorney General Eliot Spitzer has sued the 103-station radio chain Entercom Communications Corp., alleging widespread violations of statutes prohibiting pay-for-play activities by programmers.
"By accepting secret payments in exchange for airtime, Entercom compromised its radio programming and violated state and federal laws," Spitzer said. "What makes this case especially egregious is the extent to which senior management viewed control of the airways as an opportunity to garner illegal payment from record labels."
Bala Cynwyd, Penn.-based Entercom is the fifth-largest radio conglomerate in the country. It operates stations as far west as Seattle, but most of the allegations in Spitzer's 28-page complaint -- filed Wednesday in Superior Court in New York -- focus on the activities of senior Entercom officials and programrs at the company's stations in Buffalo and Rochester, N.Y.
Claims of illegal dealing at Entercom's stations surfaced last year in documents outlining Spitzer's payola-related settlements with Sony BMG Music Entertainment, which agreed to pay $10 million to the state (HR 7/26), and Warner Music Group, which settled for $5 million (HR 11/23).
Both settlements noted that Dave Universal, former program director at Entercom's Buffalo top 40 station WKSE-FM, accepted gifts and trips in exchange for airplay. Universal was fired from the station in January 2005; in interviews, he has denied any wrongdoing.
Spitzer's complaint against the chain claimed that "with the knowledge and encouragement of Entercom's corporate leadership," its stations received promotional items, invoice payments and other goods directly from labels or via independent promoters, the middlemen hired by the labels to promote singles to stations.
"The result, in both cases, has been the same: the sale of Entercom's valuable airtime to the highest bidder, without disclosure to its listeners," the complaint said.
While Entercom ended its relationships with most indie promoters in December 2004, the suit notes, "by then, most Entercom stations had already recognized that they could get far more value working directly with record companies."
In a statement, the broadcaster said: "Entercom is a company that 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. 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."
Spitzer suggested that pay-for-play practices essentially were institutional at Entercom. The complaint said that in October 2001, the company's vp programming Pat Paxton sent a memo to stations listing the amount that each station "seems to be worth" -- that is, how much each station should derive monetarily from the labels. Amounts ranged up to $125,000 per year, per station.
The complaint said, "Paxton indicated that stations could meet these goals by soliciting money directly from labels or through an independent promoter." The stations were expected, in the words of one program director, to use whatever vehicle would "get the most bang for our buck."
It further notes that Paxton reputedly told station general managers that the only reason to review forms outlining promotional arrangements was "to ensure that program directors 'aren't making bad deals,' thereby eviscerating the very check Entercom supposedly had instituted to ensure that its program directors did not accept consideration for adding records and made appropriate disclosure if they did."
WKSE programr Universal engaged in what the complaint termed "weekly, direct negotiations with record label promotion representatives" in which playlist slots were offered in return for cash or promotional benefits for the station or "on occasion, himself."
According to Universal's own records for 2004, filed as an exhibit in the suit, he negotiated in excess of $93,000 for playlist adds from a variety of major labels; that figure does not include the value of artist performances for the station. According to a memo filed as an exhibit in the suit, Entercom vp and Buffalo general manager Lawrence Robb was aware of Universal's activities as early as June 2000 and in fact received "weekly updates about adds and dollars."
The complaint claims that in 2003, the Universal South label bought a $2,500 laptop computer for WBEE-FM, Entercom's country station in Rochester, in return for airplay on two of its artists, Joe Nichols and McHayes; that exchange was later falsely claimed as a "promotion" by senior station management.
WBEE also allegedly accepted payments from independent promoters.
The action claims that Entercom stations were heavily involved in so-called "spin programs," in which paid-for overnight broadcasts of songs are detected as regular spins by such airplay detection firms as Broadcast Data Systems and Mediabase. Tabulations of these detections affect the songs' chart positions in the trade publications Billboard (a sister publication of The Hollywood Reporter) and Radio & Records.
Entercom's spin programs included CD Preview, created in 2002 by Paxton and chief operating officer David Field, and CD Challenge, a 2004 "song competition" that in one case sold to a single label, RCA, for $10,000 a month. The complaint characterizes these programs as "a means for labels to buy the right to manipulate the music charts." A third program, Total Access, was shelved after the initiation of Spitzer's investigation.
Investors seemed largely ambivalent to news of the suit, bidding shares of Entercom down, up, then down again Wednesday. They finished trading down 26 cents to $28.50.
Banc of America Securities analyst Jonathan Jacoby estimated that the lawsuit will cost Entercom as much as $10 million and predicted that the radio broadcaster "will not be the only radio company sued," noting that several others, including Clear Channel, Cox and Citadel, already have received subpoenas from Spitzer.
By Chris Morris (Hollywood Reporter)
In the first such action resulting from his investigation into music business payola practices, New York State Attorney General Eliot Spitzer has sued the 103-station radio chain Entercom Communications Corp., alleging widespread violations of statutes prohibiting pay-for-play activities by programmers.
"By accepting secret payments in exchange for airtime, Entercom compromised its radio programming and violated state and federal laws," Spitzer said. "What makes this case especially egregious is the extent to which senior management viewed control of the airways as an opportunity to garner illegal payment from record labels."
Bala Cynwyd, Penn.-based Entercom is the fifth-largest radio conglomerate in the country. It operates stations as far west as Seattle, but most of the allegations in Spitzer's 28-page complaint -- filed Wednesday in Superior Court in New York -- focus on the activities of senior Entercom officials and programrs at the company's stations in Buffalo and Rochester, N.Y.
Claims of illegal dealing at Entercom's stations surfaced last year in documents outlining Spitzer's payola-related settlements with Sony BMG Music Entertainment, which agreed to pay $10 million to the state (HR 7/26), and Warner Music Group, which settled for $5 million (HR 11/23).
Both settlements noted that Dave Universal, former program director at Entercom's Buffalo top 40 station WKSE-FM, accepted gifts and trips in exchange for airplay. Universal was fired from the station in January 2005; in interviews, he has denied any wrongdoing.
Spitzer's complaint against the chain claimed that "with the knowledge and encouragement of Entercom's corporate leadership," its stations received promotional items, invoice payments and other goods directly from labels or via independent promoters, the middlemen hired by the labels to promote singles to stations.
"The result, in both cases, has been the same: the sale of Entercom's valuable airtime to the highest bidder, without disclosure to its listeners," the complaint said.
While Entercom ended its relationships with most indie promoters in December 2004, the suit notes, "by then, most Entercom stations had already recognized that they could get far more value working directly with record companies."
In a statement, the broadcaster said: "Entercom is a company that 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. 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."
Spitzer suggested that pay-for-play practices essentially were institutional at Entercom. The complaint said that in October 2001, the company's vp programming Pat Paxton sent a memo to stations listing the amount that each station "seems to be worth" -- that is, how much each station should derive monetarily from the labels. Amounts ranged up to $125,000 per year, per station.
The complaint said, "Paxton indicated that stations could meet these goals by soliciting money directly from labels or through an independent promoter." The stations were expected, in the words of one program director, to use whatever vehicle would "get the most bang for our buck."
It further notes that Paxton reputedly told station general managers that the only reason to review forms outlining promotional arrangements was "to ensure that program directors 'aren't making bad deals,' thereby eviscerating the very check Entercom supposedly had instituted to ensure that its program directors did not accept consideration for adding records and made appropriate disclosure if they did."
WKSE programr Universal engaged in what the complaint termed "weekly, direct negotiations with record label promotion representatives" in which playlist slots were offered in return for cash or promotional benefits for the station or "on occasion, himself."
According to Universal's own records for 2004, filed as an exhibit in the suit, he negotiated in excess of $93,000 for playlist adds from a variety of major labels; that figure does not include the value of artist performances for the station. According to a memo filed as an exhibit in the suit, Entercom vp and Buffalo general manager Lawrence Robb was aware of Universal's activities as early as June 2000 and in fact received "weekly updates about adds and dollars."
The complaint claims that in 2003, the Universal South label bought a $2,500 laptop computer for WBEE-FM, Entercom's country station in Rochester, in return for airplay on two of its artists, Joe Nichols and McHayes; that exchange was later falsely claimed as a "promotion" by senior station management.
WBEE also allegedly accepted payments from independent promoters.
The action claims that Entercom stations were heavily involved in so-called "spin programs," in which paid-for overnight broadcasts of songs are detected as regular spins by such airplay detection firms as Broadcast Data Systems and Mediabase. Tabulations of these detections affect the songs' chart positions in the trade publications Billboard (a sister publication of The Hollywood Reporter) and Radio & Records.
Entercom's spin programs included CD Preview, created in 2002 by Paxton and chief operating officer David Field, and CD Challenge, a 2004 "song competition" that in one case sold to a single label, RCA, for $10,000 a month. The complaint characterizes these programs as "a means for labels to buy the right to manipulate the music charts." A third program, Total Access, was shelved after the initiation of Spitzer's investigation.
Investors seemed largely ambivalent to news of the suit, bidding shares of Entercom down, up, then down again Wednesday. They finished trading down 26 cents to $28.50.
Banc of America Securities analyst Jonathan Jacoby estimated that the lawsuit will cost Entercom as much as $10 million and predicted that the radio broadcaster "will not be the only radio company sued," noting that several others, including Clear Channel, Cox and Citadel, already have received subpoenas from Spitzer.