Spitzer may be out of bounds...

[sammy10002]

---from another news/messageboard:

Following NEW YORK Attorney General ELIOT SPITZER's release "Radio Giant Named In Payola Lawsuit" (ALL ACCESS 3/8), some attorneys are questioning his authority to go after ENTERCOM in what appears be a federal and FCC matter of payola.

ALL ACCESS asked WASHINGTON-based law firm KAYE SCHOLER and Special Counsel JASON SHRINSKY about the situation. "As the AG, SPITZER does have the right to enforce state laws, but from all I can tell this is a federal law, and he's filing a payola suit at the state level to enforce a federal payola law," SHRINSKY told ALL ACCESS.

"While I've not seen the lawsuit itself, I do question his legal rationales and authority in this matter. In my opinion his strategy is that he's bullying these public companies into settlements, and that in the end some will settle, other won't. I also feel that he's going well beyond the bounds of NEW YORK STATE law, and what he's classifying as payola is not payola, consistent with federal statutes and the FCC's rules.

Payola Defined

SHRINSKY was an FCC lawyer in the 1960s and has been involved with payola matters since that time, going into private practice at KAYE SCHOLER and representing clients who were subpoenaed by the FCC who were called to testify in those hearings during the 70s.

He defines payola as "something that's broadcast over the air for compensation without proper sponsorship identification. If you paid me to play a song, I could play it as long I disclose it.

"Again, SPITZER's tactics are to go after publicly traded companies. He's trying to get them to settle to mitigate the public image that his accusations are having on the company, and its stock price. The bigger issue is he is tainting the radio and record industries without proving his case."

SHRINSKY concluded by saying "my prediction is that I suspect that ENTERCOM will fight this matter. All of the spin programs he's pointing to are legal -- he may not like them and what they point to but they are legal."

Goal: Getting FCC's Attention

Another prominent entertainment lawyer, speaking on condition of anonymity, told ALL ACCESS that "SPITZER has the right to file this suit. It's not frivolous on its face, but it appears that the real goal is to get the attention of the FCC. He has couched the issue in his press release as a payola issue which would be a Federal and not State issue and he would have no jurisdiction over a Federal issue.

"He alleges violations of NEW YORK STATE law, which have to do with bribery, consumer fraud and deception which are different than payola. In this case, SPITZER is alleging that Programmers were given money to play songs while the public was assuming it's the best song being played, and the public being unaware that the music was actually bought airtime.

"From a Federal standpoint, payola is primarily an issue of nondisclosure. Receiving a payment is OK if it is disclosed on air. This is not the same as making a business deal for good product placement with a grocery chain. Even though radio companies are not government owned, they are still subject to Federal payola laws and must operate in the public good with additional restrictions that do not control most private companies.

It seems that SPITZER has scared people from conducting legitimate business practices. The attorney added, " I would predict that SPITZER will lose at the state level, and the FCC will do little if anything as the industry has already addressed the problem on its own. The point is not to be punitive, but to clean up the situation and go forward. It's really now a moot point."

Calls to SPITZER's offices in ALBANY and MANHATTAN have gone unreturned.

 

[SirRoxalot]

He Hasn't Lost Yet

A couple of points...

1. Spitzer has filed a civil suit against Entercom, not criminal charges. He's alleging that some of their business practices were illegal, and defrauded both consumers and record companies.

2. The record companies settled with Spitzer for millions of dollars. Is anyone under the impression that they can't afford the best lawyers in the business? I'm betting that the can, and did, and the best advice they got told them to settle. Sounds to me like a couple of law firms who make their living out of defending people brought up before the FCC are fishing for clients - if they don't already represent people likely to face payola charges when the FCC finally decides to act.

Spitzer has taken on the insurance industry and the investment industry - both of which were supposed to be untouchable - and won. I wouldn't put money on him losing against the broadcast industry.

 

[Radknowski]

Re: He Hasn't Lost Yet

> A couple of points...
>
> 1. Spitzer has filed a civil suit against Entercom, not
> criminal charges. He's alleging that some of their business
> practices were illegal, and defrauded both consumers and
> record companies.
>
> 2. The record companies settled with Spitzer for millions of
> dollars. Is anyone under the impression that they can't
> afford the best lawyers in the business? I'm betting that
> the can, and did, and the best advice they got told them to
> settle. Sounds to me like a couple of law firms who make
> their living out of defending people brought up before the
> FCC are fishing for clients - if they don't already
> represent people likely to face payola charges when the FCC
> finally decides to act.
>
> Spitzer has taken on the insurance industry and the
> investment industry - both of which were supposed to be
> untouchable - and won. I wouldn't put money on him losing
> against the broadcast industry.
>

I think even the most jaded observer would presume that Eliot Spitzer has more knowledge of the law than most of the mooks (which would include ME) who post here.

I've read the Complaint and reviewed the Exhibits. As a layman, the case against Entercom appears to be damning. I've also talked to a few lawyers. Ironically, this month, our company has been working on a project renovating law offices for a medium-sized law firm. Two lawyers who've looked at the Complaint and Exhibits have offered that "Entercom's actions were, at the very least, imprudent (lawyer talk) and appear on face value ('prima facie,' is the legal term, I believe) to be a violation of certain sections of the U.S. Code Of Law and equally if not more applicable, New York state law."

Spitzer's actions are not frivilous; unless, of course, you're an attorney who's charged with defending Entercom and spinning the company's position. Poor, poor Entercom, so downtrodden and maligned. Entercom and the corporate apologists will do their best to excuse the company's actions and actions of this type in any business, whether it's insurance, the stock market or import-export.

Here's the long and short of it. The NYS Attorney General's office alleges that laws were broken. The case will be tried. A judge and jury will decide if the charges have merit to convict. As Rox and others have duly noted, more than likely Entercom will settle out of court. Observes in the trades say $10-20 million might make everything right. If the company settles, even the average guy on the street should understand WHY the suit was settled. As Bob Dylan once said, "you don't have to be a weatherman to know which way the wind is blowing."

As to "who cares" about Spitzer pursuing this issue. I care. Apparently a number of fair-minded posters and readers care. At this juncture, I'd bet that David and Joe Field care. A lot.

As citizens, we would do well care more about matters of this nature than about who was voted off American Idol this week and who won Survivor.

 

[sammy10002]

Re: He Hasn't Lost Yet

>
> As citizens, we would do well care more about matters of
> this nature than about who was voted off American Idol this
> week and who won Survivor.
>

The time to care was in 1996 when the Telecommunications Act was at issue. Since that time, the "publics interst" has been, and will continue to be, of marginal importance to anyone who owns a radio station.

THAT is expressly the fault of the same government that is now so concerned with the "public interest" regarding payola.

What a joke.

 

[SirRoxalot]

He Who Laughs Last...

> What a joke.

Sammy, we'll see who's laughing after the millions have changed hands. As far as the public interest is concerned, who do you think is listening to radio stations if it isn't the public?

If you think that the government isn't acting in the public interest, please outline your view of the government's failings. You may also wish to remember that broadcast radio is only a small slice of what the FCC regulates, and that there's a sweeping change taking place in the telecommunications spectrum.

Analog to digital conversion isn't just something happening inside your computer. It's happening in telephone, television, cable, satellite, cellular, and virtually every other form of communication. Bandwidth will be reallocated and reused more efficiently than ever before, and delivery of content - be it news, talk, music, entertainment, or whatever - is already significantly different now than it was in 1996. The pace of change is accelerating, and the next ten years will bring even more services and delivery systems to the marketplace.

 

[sammy10002]

Re: He Who Laughs Last...

> > What a joke.
>
> Sammy, we'll see who's laughing after the millions have
> changed hands. As far as the public interest is concerned,
> who do you think is listening to radio stations if it isn't
> the public?
>
> If you think that the government isn't acting in the public
> interest, please outline your view of the government's
> failings. You may also wish to remember that broadcast radio
> is only a small slice of what the FCC regulates, and that
> there's a sweeping change taking place in the
> telecommunications spectrum.

My point was that if we'ew all so suddenly concerned about the "public interest" as it relates to broadcasting, then why was consolidation allowed to take place to the degree that it was? THAT has far more potential to adversely affect the public than any alleged record company payment to a radio station.

How can you seriously talk about the ill effects of payola when so many markets are manipulated by so very few---and I'm talking both musically AND news-wise.

 

[SirRoxalot]

Fishing for Red Herring

> My point was that if we'ew all so suddenly concerned about
> the "public interest" as it relates to broadcasting, then
> why was consolidation allowed to take place to the degree
> that it was? THAT has far more potential to adversely affect
> the public than any alleged record company payment to a
> radio station.

This is known as the Red Herring Defense, a/k/a "Why bother with this evil, when that evil is so much worse?"

The FCC has generally tried to tip-toe through a minefield of high-priced lawyers for both sides of the consolidation debate.

Since there are a number of other sources for news, information, and entertainment - including the explosion of cable and high-speed Internet services, broadcasters argue that artificial limits are no longer necessary to ensure a diversity of viewpoints, that limits violate their constitutional rights, and that limits are an obstacle to free enterprise.

Opponents argue that media consolidation reduces the number of viewpoints that will be expressed, that broadcast stations serve an audience limited to a relatively small number of channels, and that broadcast services are perhaps the most widely available way to disseminate information. As such, no one company should be allowed to monopolize a major portion of the airwaves.

As it is, we stand at a point where there are numerical limits to ownership based on market size. The Federal Court prevented the FCC from changing those ownership limits in 2002 without indicating if any changes would be acceptable. Rather than try to predict the actions of the Federal Court, The FCC has chosen inaction in regard to ownership limits.

> How can you seriously talk about the ill effects of payola
> when so many markets are manipulated by so very few---and
> I'm talking both musically AND news-wise.

If you read my earlier post, you might come to the conclusion that the whole payola scandal is about preventing the manipulation of markets by both broadcasters and music companies.

As far as news is concerned, there are ample outlets for virtually every point of view. As far as the requirement that broadcast outlets provide news and information services, what's the point? Listeners have tuned out newscasts in favor of music for years. There are news stations in town available to everyone. Does making WKSE run a newscast make any real sense if listeners are just going to tune over to WBLK when it comes on?

 

[sammy10002]

Re: Fishing for Red Herring

>
> As far as news is concerned, there are ample outlets for
> virtually every point of view. As far as the requirement
> that broadcast outlets provide news and information
> services, what's the point? Listeners have tuned out
> newscasts in favor of music for years. There are news
> stations in town available to everyone. Does making WKSE run
> a newscast make any real sense if listeners are just going
> to tune over to WBLK when it comes on?
>


For these EXACT same reasons, payola is of minimal consequence to the "public interest". After all, there ARE so many other ways for the public to be exposed to an artists work.

You cannot have it both ways.

 

[SirRoxalot]

Re: Fishing for Red Herring

> For these EXACT same reasons, payola is of minimal
> consequence to the "public interest". After all, there ARE
> so many other ways for the public to be exposed to an
> artists work.

There's no reason that radio stations shouldn't play songs for pay. The only problem here, as stated in this post, is that radio stations simply need to IDENTIFY the songs that they're playing in return for compensation. As outlined in that post, this is NOT a victimless crime.

> You cannot have it both ways.

I'm not trying to have it both ways. I'm also not guilty of breaking well-documented laws that should be familiar to everyone in the broadcasting industry.

If you don't like the laws, work to get them changed. Otherwise, you ignore them at your peril.

 

[sammy10002]

Re: Fishing for Red Herring

> There's no reason that radio stations shouldn't play songs
> for pay. The only problem here, as stated in this post, is
> that radio stations simply need to IDENTIFY the songs that
> they're playing in return for compensation. As outlined in
> that post, this is NOT a victimless crime.
>

The public are victims?

Let's think reeeeeal hard about that.

Do you really believe that if a station went on the air and screamed "WE'RE PAID TO PLAY THIS!!!" it would amount to the slightest hill of beans?

I mean, really.

 

[SirRoxalot]

Re: Fishing for Red Herring

> Do you really believe that if a station went on the air and
> screamed "WE'RE PAID TO PLAY THIS!!!" it would amount to the
> slightest hill of beans?

Yep. Listeners would understand that a lot of crappy music makes the playlist because it's paid for, not because it's has merit.

> I mean, really.

Really.

 

[sammy10002]

Re: Fishing for Red Herring

>
> Yep. Listeners would understand that a lot of crappy music
> makes the playlist because it's paid for, not because it's
> has merit.


...and this would change ANYTHING?

How exactly?

Are you implying that people will listen to a rotten song because they aren't aware the station received compensation for playing it?

Seems to me that BAD music is BAD music. If I don't like something, I don't listen to it---regardless of who was paid anything.

Forgive me for injecting a little common sense into this.

 

[SirRoxalot]

Obtuse

> Are you implying that people will listen to a rotten song
> because they aren't aware the station received compensation
> for playing it?

People get stuck listening to a rotten song because they aren't aware that something better is available. The better song doesn't get played because the rotation only allows X number of songs, and what might be a better song gets bumped because a paid-for song replaces it.

> Forgive me for injecting a little common sense into this.

Your "common sense" still hasn't addressed the "IT'S ILLEGAL" issue.

 

[sammy10002]

Re: Obtuse

>
> People get stuck listening to a rotten song because they
> aren't aware that something better is available. The better
> song doesn't get played because the rotation only allows X
> number of songs, and what might be a better song gets bumped
> because a paid-for song replaces it.
>

Let's try to remember that this is all very SUBJECTIVE!

How do you even begin to prove what is a BETTER song? You cannot legislate taste. Even after this is overwith, record companies will eventually come up with some other way to get their artists song played over someone elses.

People make laws, people can change laws. My point is that, in the scheme of things, this is of no consequence to anyone.

The world is no better or no worse because of this.

P.S. There are likely PLENTY of crappy music directors who put crappy songs on for FREE because they have horrible taste. How do we solve that little problem? Oh, I know, ratings success will dictate that, right? Well, that can also be said of a station that plays crappy music for pay.

 

[SirRoxalot]

Re: Obtuse

You have your opinion. I have mine. Audience research has shown that people prefer to listen to music that they believe they've played a part in selecting through requests, purchases, focus groups, etc. I believe that radio stations playing a significant amount of music based on publicly-announced airtime purchases would suffer greatly in the ratings. Why do you think the radio stations hid that fact?

This will be of significant consequence to those people who will be caught up in both the NYAG's investigations, and the ongoing FCC Payola investigation.

You, obviously have a different opinion, and continuing to pursue this arguement would be fruitless. Let us agree to disagree, and let the marketplace decide.

 

[sammy10002]

Re: Obtuse

> Audience research has
> shown that people prefer to listen to music that they
> believe they've played a part in selecting through requests,
> purchases, focus groups, etc.
>

Considering that MOST people DO NOT request songs from radio stations OR do not buy a song BEFORE they've heard it, certainly deflates your argument about the illusion of "participation" doesn't it?

Also, the argument that it simply "is not legal" makes the law self perpetuating without regard for common sense.

> I believe that radio stations
> playing a significant amount of music based on
> publicly-announced airtime purchases would suffer greatly in
> the ratings. Why do you think the radio stations hid that
> fact?

Clear Channel's nationalized contesting methods prove that;
A) There are ways around the rules, and
B) Nobody really cares

Most people listen with one ear and believe "it's only radio".

And you know what? They're right.

 

[SirRoxalot]

Re: Obtuse

> Considering that MOST people DO NOT request songs from radio
> stations OR do not buy a song BEFORE they've heard it,
> certainly deflates your argument about the illusion of
> "participation" doesn't it?

You just proved my point. People don't buy songs that they haven't heard. If a song isn't heard because it's displaced by a paid "spin", that artist is harmed. People have the expectation that songs are played more often because they are legitimately more popular. Spin programs artificially inflate the perceived popularity of a song. Whether participation in the selection of songs is real or perceived, people prefer to think that they've played a part, and songs haven't been selected by a marketing machine.

> Also, the argument that it simply "is not legal" makes the
> law self perpetuating without regard for common sense.

What you claim is "common sense" doesn't fit the opinion of the majority. Until you can change the mind of the majority, you lose.

> Most people listen with one ear and believe "it's only
> radio".
>
> And you know what? They're right.

Well, if it's "only radio", there are a lot of advertisers getting great results from spending hundreds of millions of dollars to catch the "one ear" of those people who "don't really care".

I believe you're wrong. You believe you're right. Unless you can come up with some quantitative analysis that indicates that you're right, I'm done with this conversation.

 

[sammy10002]

Re: Obtuse

MOST people don't start liking a song because they think it is popular. If that was true, there would be NO stiffs!

The FACT is, like it or not, a whole station could play nothing but crappy
paid-for songs---and NO ONE would listen! You must really believe that listeners only like songs they **think** everybody else likes.

That is absurd.

And most listeners do listen with only one ear---which is why commercial schedules are as repetitive as they are.

 

[Radknowski]

Re: Obtuse

>
> Let's try to remember that this is all very SUBJECTIVE!
>
> How do you even begin to prove what is a BETTER song? You
> cannot legislate taste. Even after this is overwith, record
> companies will eventually come up with some other way to get
> their artists song played over someone elses.

Here's an interesting point that was explained to me years ago by a veteran music director who knew the music business inside-out. Payola existed for two reasons: (1) Get song "A" played [frequently] and (b) take the place of other songs [on different labels] that might have been added that week.

Years ago, songs were played contonuously on their merit, how many singles were sold as a result of being played.

To be sure, there were songs that were "added" because somebody's palm was greased that were nonetheless stiffs, and even though the record company/independent promoter might have bought several hundred copies of that stiff in an attempt to pump up sales, a stiff is a stiff is a stiff. If the song most languished at the bottom of the station's "Top 40" chart, it got dropped and replaced by another song with equal or greater potential of becoming a hit. After two or three weeks, even phantom record purchases couldn't help that song stay in rotation.

> People make laws, people can change laws. My point is that,
> in the scheme of things, this is of no consequence to
> anyone.
>
> The world is no better or no worse because of this.
>
> P.S. There are likely PLENTY of crappy music directors who
> put crappy songs on for FREE because they have horrible
> taste. How do we solve that little problem? Oh, I know,
> ratings success will dictate that, right? Well, that can
> also be said of a station that plays crappy music for pay.

Though Kiss rode a wave of success through most of Dave Universal's tenure as PD, keep in mind that it was the ONLY true CHR station in Buffalo until Wild 101 came along and ruined the party. Interesting what a little competition can do. To be sure, Wild 101 didn't beat Kiss across the board (as far as I can tell, based on then-published 12+ numbers and what insiders told me) but Kiss did take a very serious hit in the 12-24 demo as the bottom dropped out. Insiders say that there was some irony in Universal's because had Entercom waited only one more week, they could have legitimately fired him for "having a bad book." It was that bad, destroyed on the bottom end by Wild 101 and Star 102.5 on the top end. The station hasn't really recovered to this day.

 

[Radknowski]

Re: Obtuse

> MOST people don't start liking a song because they think it
> is popular. If that was true, there would be NO stiffs!The FACT is, like it
> or not, a whole station could play nothing but crappy paid-for songs---and NO ONE would listen! You must really believe that listeners only like songs they **think** everybody else likes.

In fact, about a month ago, the results of bonafide research into the music tastes and listening habits was released that addressed this very issue. The study was done by a major university and delved into what makes a song likeable and eventually popular. Amoung the study's many conclusions, young men and women are apt to SAY they like songs they THINK other people their own age and social grouping like. The results were published in USA Today and a major medical-research journal as well as ABC World News tonight.

> And most listeners do listen with only one ear---which is
> why commercial schedules are as repetitive as they are.

The benefit of radio advertising and the reason it works is repetition: Reach and frequency. Even when listeners listen with "one ear and half a brain," the message gets through.