FCC Laggard on Payola, N.Y.’s Spitzer Says

Entercom DJs “traded airplay for revenue,” encouraged and sometimes pressured by company executives, alleged a complaint filed in N.Y. state Supreme Court. The firm took cash for playing songs, inflating their chart ranks, it alleged. N.Y. Entercom stations WKSE(FM) and WTSS(FM), both in Buffalo, and WBEE(FM) Rochester accepted money or goods from labels or independent promoters to play songs, said the suit. A 2001 memo cited in the suit said station budgets included cash from labels and promoters. CFO Steve Fisher, listed as the memo’s recipient, declined to talk with us about the suit. “Entercom is a company that believes in playing by the rules and does so,” said a company statement. The firm won’t comment on the suit’s merits, said a spokesman.

Spitzer used the suit announcement to harangue the FCC. “The FCC has yet to respond in any meaningful way… almost a year after payola was exposed in significant detail,” he said in a statement: “The agency’s inaction is especially disappointing given the pervasive nature of this problem.” There’s been a lack of communication with FCC officials, said a spokeswoman for Spitzer’s office. “He'd like to work with them,” she said. An Enforcement Bureau official declined comment. Spitzer, running for governor, has made probes that subsequently spurred inquiries by agencies such as the SEC.

“Chairman Martin is concerned about any violations of the payola rules and has directed the FCC’s enforcement bureau to thoroughly investigate any evidence of payola rule violations brought before it,” said an FCC spokesman in a statement read to us. Probes kickstarted by Spitzer’s previous music label settlements “are currently pending at the FCC,” it said.

Comr. Adelstein, frustrated at FCC laggardliness, said Spitzer has generated enough documentation to make a federal case. He “is piling evidence on top of evidence of the widespread abuse of the public trust,” said Adelstein. He added there are “voluminous documents pointing to major, systematic violations of FCC rules.” Adelstein has hectored FCC Chmn. Martin to pursue payola harder. An Adelstein aide had said the Enforcement Bureau isn’t reviewing enough data from Spitzer’s office (CD Dec 27 p3). “We can’t let any violators get away with a slap on the wrist,” said Adelstein in a press release. Martin opened a probe of payola in Aug. after a settlement with Sony BMG (CD Aug 9 p8). Warner Music settled to end a separate probe (CD Nov 23 p10).

One factor in Martin’s deliberate response may be that, to stop payola, the agency has to come up with new media ownership rules it so far has punted on, Free Press Campaign Dir. Timothy Karr said: “There are certain commissioners there who favor stronger enforcement against what appears to be widespread payola abuses. However, it’s left to Chairman Martin to give the final word in enforcement.” More than 50,000 Free Press members have e-mailed the FCC demanding tougher enforcement, said Karr. “The FCC has been asleep at the switch, and it shouldn’t require an aggressive attorney general to turn up evidence like this,” Andrew Schwartzman, pres. of Media Access Project, said: “Is [Martin] going to do something or not? This is the test.”

‘Investigating the Whole Industry’

Other broadcasters besides Entercom are being examined, said Spitzer’s spokeswoman. Nine firms have been subpoenaed, said Free Press. While the govt. official didn’t comment on that number, she said “the rest of the radio stations are under investigation.”

The FCC has been on the case, said a broadcast executive who asked to remain anonymous. FCC officials have met with radio executives on the payola inquiry, said the source, but no fines have been levied. A small broadcaster called payola widespread among big firms. “It’s a significant problem, and it’s mostly the huge conglomerate chain operators who are receiving the payola and using it to unfairly compete,” said John Fuller, pres. of Red Wolf Bcstg. His firm asked the FCC to deny the transfer of some Citadel Bcstg. licenses because of what he termed payment for repeatedly playing songs (CD March 6 p11). Red Wolf owns 2 Conn. stations.

Big broadcasters said they're doing all they can to prevent illegal activity. Clear Channel has beefed up training on how to follow broadcast laws, Chief Legal Officer Andy Levin said: “We are doing everything we can to make sure pay for play is not an issue.” Workers sign an affidavit agreeing to follow rules; violators can be fired, he said. A music executive at another broadcaster said all employees must read a handbook on payola and pledge to follow the rules.

Fuller criticized the FCC for not acting sooner: “It’s amazing that the FCC doesn’t take a bigger stance on this stuff.” Other observers said they find the FCC’s inactivity puzzling. “We haven’t had a peep of a sense that anything is happening,” said George Washington U. Prof Christopher Sterling, a FCC 8th floor staffer in the early 1980s.