It was a New York lawsuit with a Madison angle, and it ended Dec. 21 with a settlement that precluded a court finding of liability.
The People of the State of New York vs. Entercom Communications was filed by former attorney general (now governor) Eliot Spitzer on March 15, 2006. Spitzer's complaint alleged that Entercom had engaged in deceptive business activities in New York state by choosing songs for broadcast based on "payments or consideration from record labels or their representatives without disclosure to the public."
The Madison angle involved evidence ("exhibits") submitted by Spitzer that alluded to Madison's 105.5 Triple M, one of more than 100 radio stations in the U.S. owned by Entercom.
The exhibit documents described Triple M's involvement in a program called "CD Preview" that Spitzer said facilitated the sale of song "spins" to record labels. One document listed a price of $1,000 for 14 spins on Triple M. "Spin counts" are valuable to record labels because they are tracked by electronic detection services and become the basis of a song's chart status.
Another exhibit included Entercom's estimate that Triple M could yield $50,000 in revenue from an independent promoter. Record labels pay independent promoters to market their music to radio stations, but the funds are not supposed to be passed on to stations as a means of securing record spins.
A third exhibit suggested specific airplay to be provided by Triple M in exchange for a Rolling Stones Chicago flyaway promotion and tickets to that concert for former Triple M program director Tom Teuber. In a July 2006 letter to Isthmus, Teuber denied ever receiving the tickets and said he did not attend the show.
Triple M was not a defendant in the suit, and the New York attorney general does not have jurisdiction in Wisconsin. But evidence involving the station was used by Spitzer to support his payola allegations against Entercom's corporate management.
The terms of the settlement announced last month include a $4.25 million payment by Entercom. Of that amount, $3.5 million will support music education programs in New York and $750,000 will cover the attorney general office's costs in pursuing the lawsuit.
Under the settlement, Entercom has also agreed not to accept funds from independent promoters, to hire a compliance officer and to initiate a system to monitor future abuses.
Triple M program director Pat Gallagher and Entercom Madison general manager Ron Raybourne declined comment on the settlement. They directed an interview request to Entercom's contracted public relations firm in New York. A representative of that firm also declined comment, but issued a copy of Entercom's official settlement statement:
"In the interests of the company, our employees and our shareholders, we have chosen to resolve this matter immediately and without extensive and costly litigation. The court did not find any liability, nor are we admitting liability with this settlement."
The settlement, in fact, preempted the process under which the court might have determined liability. Prior to the settlement, on Oct. 12, 2006, Judge Ira Gammerman denied a motion by Entercom to dismiss the suit. Gammerman's denial provided the single, albeit preliminary, court opinion put forward in the case.
"I conclude that the allegations of the complaint as to the materially deceptive nature of the CD Programs are sufficient to withstand a motion to dismiss," wrote Gammerman. Gammerman defined "CD Programs" as including the "CD Preview" show that was aired on Triple M and other Entercom stations.
Gammerman's opinion reveals the fine line between illegal payola and the legal purchase of airtime by record labels.
"While I have no occasion to reach this issue," wrote Gammerman, "I note that if an electronic signal had been inserted during airplay to note that a song is a paid-for spin, such a step might well resolve the deceptive nature of the CD Programs."
Payola schemes involve record companies' attempts to exert influence over what new music gets played on the radio. Whether the Entercom settlement will change what listeners hear on local airwaves is an open question.
Dr. David Park, professor of communications at Louisiana's Xavier University, thinks the effects of the settlement will be limited.
"Entercom's settlement is a step in the right direction," says Park, who earned his Ph.D. in mass communications from UW-Madison in 2003. "However, until antitrust breaks up media conglomeration, cross-promotion is regulated, more community and nonprofit media are created, and quotas for independent and local music are required for radio stations, not much will change. Perhaps we'll hear more commercials on the Entercom stations, since they'll lose some of their revenue."
On Nov. 1, 2006, U.S. Sen. Russ Feingold (D-Wis.) sent a letter to Kevin Martin, chairman of the Federal Communications Commission (FCC), inquiring about the status of the agency's own payola investigation. The FCC opened an investigation following Spitzer's legal actions against major record labels and radio groups.
"I hope this request will prompt the FCC to make a clear statement that it will not tolerate payola in any form, in order to close any supposed loopholes," Feingold wrote. "I urge the FCC to build on attorney general Spitzer's investigation and assert its authority to prevent payola to the fullest extent possible."
With Feingold leading the national effort for a legislative solution, radio payola reform will continue to have a Wisconsin angle. Feingold introduced the Radio and Concert Disclosure and Competition Act in November 2005, but the bill was never acted on by a Republican-controlled Congress. Feingold will continue to advocate for the measure this year.
Feingold's bill would require radio stations to disclose everything they've received from record labels or their representatives and to cross-reference it against a list of the songs played every month, broken down by label and artist. Feingold believes the increased transparency would discourage stations from pursuing payola practices.
"Let me put this in context and remind my colleagues that radio stations use a public resource, the airwaves, to reach their listeners," Feingold said to members of Congress when he introduced the bill. "With this use comes a responsibility to the public. Too often, today's radio listeners are left to wonder whether a song was played because the station manager got a new laptop."
