PAYOLA DOESN’T PAY

New York State Attorney General Elliot Spitzer announced on July 25 an agreement to halt pervasive “pay-for-play” in the music industry.

Under the agreement, Sony BMG, one of the world’s leading record companies and owner of a number of major record labels, has agreed to stop making payments and providing expensive gifts to radio stations and their employees in return for airplay for the company’s songs.

“Our investigation shows that, contrary to listener expectations that songs are selected for airplay based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees,” Spitzer said. “This agreement is a model for breaking the pervasive influence of bribes in the industry,” said Attorney General Spitzer.

The inducements for airplay, also known as “payola,” took several forms:

• Outright bribes to radio programmers, including expensive vacation packages, electronics and other valuable items;
• Contest giveaways for stations’ listening audiences;
• Payments to radio stations to cover operational expenses;
• Retention of middlemen, known as independent promoters, as conduits for illegal payments to radio stations;
• Payments for “spin programs,” airplay under the guise of advertising.

Under the agreement, Sony, building on guidelines it issued earlier this year in response to the attorney general’s investigation, has agreed to stop making payoffs in return for airplay and will fully disclose all items of value provided to radio stations in the future. Sony also has agreed to corporate-wide reforms, including hiring a compliance officer responsible for monitoring promotion practices and developing and implementing an internal accounting system designed to detect future abuses. This is the first time an entertainment company has agreed to such sweeping reforms.

COUNCIL SUPPORTS PRO-TENANT BILL

Toward the end of the City Council’s legislative session, a significant bill entitled the Tenant Empowerment Act was approved that requires landlords who want to opt out of subsidized Mitchell-Lama and Section 8 housing to give tenants a “first refusal” on buying their buildings. If tenants match the free market price offered by another buyer, the landlord would have to sell the building to the tenants.

It is expected that enactment of the right of ownership will prompt civic and community organizations to step forward and assist tenants with requisite financing for purchase. Management entities will have to answer to tenant associations and not-for-profits will compete with other organizations for the job of facilitating purchase and of building management.

FILM PRODUCTION TAX CREDIT UPDATE

As part of the 2004-2005 state budget, New York created the Empire State Film Production Tax Credit, offering a 10 percent credit on below-the-line costs for films that shot 75 percent of their production in New York. In addition, New York City created the “Made in NY” program, investing another $25 million so that productions could receive up to a 15 percent credit.

These two tax incentive programs have attracted $300 million in new production business since January 2005. This new business has also employed about 6,000 New Yorkers.

“The ‘Made in NY’ incentive program has made New York City more attractive than ever to film and television producers, and we continue to hear about new productions each day,” said Katherine Oliver, commissioner of the Mayor’s Office of Film, Theatre and Broadcasting. “New York City has always offered film and television productions the finest crews, richest talent and irreproducible locations, and now with a 15 percent tax credit and free outdoor advertising, there is no reason for producers not to make it in NY. Watch for the ‘Made in NY’ logo in the end credits of productions to confirm they were shot right here in the entertainment capital of the world.”