ALBANY, New York – CBS Radio Inc. has agreed to pay $2 million to settle New York Attorney General Eliot Spitzer's investigation into gifts or "payola" paid by record companies for air play, Spitzer said Thursday.
CBS Radio is the third-largest radio corporation in America and the latest to settle in the investigation of radio station employees getting gifts such as trips and electronic equipment in exchange for playing songs and artists to increase sales. The gifts were often used for on-air contests and sometimes used by radio station employees. SonyBMG, Warner, Universal and EMI had previously settled with Spitzer.
"The sale of the station's valuable air time to the highest bidder violates state and federal laws and robs consumers of their right to know why the songs they hear on the radio are being broadcast," Spitzer said.
Payola is the term coined in the 1950s when early rock music was hit with the scandal. It is a combination of the words "pay" and "Victrola," the old wind-up record player.
Spitzer said pay for play was being done at CBS radio stations in Rochester, Buffalo and New York City.
He said a July 17, 2001, memo at WZNE in Rochester to the general manager and program directed listed "what we've added ... & a summary of our returns from the record labels."
Spitzer said songs that were on the station's playlists because of the practice include "Shut Up" by Nick Lachey and "You are my .1" by Smashmouth. In exchange for airplay, the stations received airplane trips to be used in contests.
"CBS Radio is pleased to end this two-year music investigation without litigation," said CBS Radio spokeswoman Karen Mateo. "The company, however, wants to make clear that in entering into this settlement, CBS Radio does not admit to any liability or violation of law."
She said CBS Radio had become aware of the practice and two employees violated the company's policies.
"Appropriate disciplinary action was taken by CBS Radio, with suspension without pay in one instance, and immediate termination in the other," she said. "We believe this outcome is better for our company and our shareholders than protracted litigation, and we appreciate the spirit of mutual cooperation that guided the resolution of this settlement."
"I commend Attorney General Eliot Spitzer for once again achieving a breakthrough with this settlement. CBS Radio is leading the radio broadcasting industry by finally admitting wrongdoing and agreeing to change its practices. This should provide new fuel to drive the FCC payola investigation to completion. Since payola saps the vitality out of radio, this is a win not only for listeners everywhere, but also for the radio industry itself."
Other radio conglomerates paid more to settle their suits, including $12 million paid by Universal and $10 million by Sony.
Commissioner Jonathan Adelstein of the Federal Communications Commission called the settlement a "breakthrough."
"This should provide new fuel to drive the FCC payola investigation to completion," said Adelstein, a Democrat. "Since payola saps the vitality out of radio, this is a win not only for listeners everywhere, but also for the radio industry itself."