US: Ads Test Payola Case Settlement

Hardly more than a year has passed since the nation's biggest record labels started agreeing to a series of measures that were intended to end the industry's long history of employing bribes and other shady practices to influence which songs are heard on the radio.

But it has become increasingly clear that the industry is still grappling with how to change its culture. In the last two weeks, songs from two record labels - both distributed through Vivendi's Universal Music Group - got a lift on the charts after a radio chain was paid to play the tunes as part of commercials late at night in an advertising program that New York state officials say is used to trick radio programmers.

The ad purchases come five months after Universal settled accusations that it bribed radio programmers with gifts in exchange for airplay and engaged in other deceptive practices. The accord, in which Universal agreed to pay $12 million to New York charities, was the biggest so far in a sweeping investigation of the music industry that has been led by Eliot Spitzer, the New York attorney general.

In the settlement - which extends to any label or other entity whose practices are "directed or controlled" by Universal - executives are prohibited from, among other things, buying advertisements for the purpose of misleading the independent services that compile airplay data for Billboard and other publications. If Universal purchases a commercial containing more than 60 seconds of song - potentially enough for a tracking service to count it as regular airplay - the company must provide written notice of the ad.

Last week, Blackground Records, a Universal-distributed label, purchased ads that enabled the song, "Too Little, Too Late" by the teenage singer JoJo to climb to the No. 2 position on the nation's mainstream pop radio chart. Before that, a representative for Nickelback, a rock band on Roadrunner Records, a Universal-distributed label, paid for ads that inflated the performance of the song "Far Away." The tune ranked as the week's No. 1 song.

A spokeswoman for Mr. Spitzer, Juanita Scarlett, said yesterday that the attorney general's office was "aware of the possible violation of the terms of our agreement with Universal and we are looking into the matter."

Universal said in a statement that it had no ownership interest in Blackground and no management control in Roadrunner. "We're investigating these allegations but the decisions for these two acts were made by these two companies, outside of our control," the statement said. "We made them aware of our new promotion policies and have encouraged them to follow the new procedures."

It was not clear what remedies Mr. Spitzer might seek if a record company was found to violate the terms of the settlement. In March, Mr. Spitzer filed a lawsuit against Entercom Communications, which ran the JoJo and Nickelback ads as part of a program called "CD Preview." The lawsuit says that Entercom marketed the program explicitly as a means to manipulate a song's performance on industry charts. Batches of "spins,'' or plays of a song, could be purchased for $1,000 to $3,500, and the program generated more than $2 million a year for the company, the lawsuit said. Entercom declined to comment yesterday.

Rob Sisco, president of Nielsen Music, which includes an airplay-tracking service, said "unless we're notified ahead of time, as these agreements spell out clearly, there's little we can do to discern what was and wasn't an advertisement."

But the disclosure also raises questions about how the settlements will be enforced and whether music executives will try to capitalize on perceived loopholes. In the mid-1980's, for example, a payola, or pay-for-play, practices scandal prompted many of the major labels to swear off the use of independent record promoters, or middlemen who had been used to funnel money to radio stations. But according to the book "Hit Men," an array of artist managers picked up the tab for the promoters' services instead.

How Mr. Spitzer's office responds now will determine how much weight the industry's settlements carry. All four major record corporations have agreed to clamp down on illicit payola. But label executives evidently remain tempted by the lure of a top radio chart position - which translates to bragging rights and, potentially, album sales.

"Radio promotion executives are still under enormous pressure to use tools that maximize radio airplay because airplay still sells recordings," said Rachel Stilwell, a Los Angeles lawyer who has written about payola and who worked several years ago as the national director of promotion for the Verve Music Group, a Universal subsidiary label. "Old habits die hard."

• 185 Corruption
• 188 Consumerism & Commercialism