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Radio companies, FCC agree to decree

The long-awaited agreement between the FCC and four radio giants is out. It involves the payola controversy which emanated from Eliot Spitzer's efforts in New York state back while he was AG (he's now the governor). Entercom, Clear Channel, CBS Radio and Citadel will pay a total of 12.5M (on a sliding scale) to put the matter to rest. Entercom was at the head of the parade, with a 4M voluntary payment to the US Treasury, followed by Clear Channel (3.5M), CBS (3M) and Citadel (2M). In return, the companies will face no further liability on the matter, and as is SOP with the consent decree format, they are not required to admit wrongdoing. The companies will institute policies and procedures to head off any future payola/plugola activity, including staff training. It will document all items of value exchanging hands in dealings with record companies, will appoint a corporate compliance officer to monitor the company's internal efforts, aided by compliance contacts at each local operation. The compliance officer will report quarterly to corporate general counsel, and annually to both the corporate board of directors and the FCC. The companies also agreed to air four thousand hours worth of material from independent artists, an agreement struck outside the parameters of these consent decrees but hailed in the comments of Commissioner Jonathan Adelstein (D), who was a driving force behind the agreements. All four commissioners supported the agreements, with Adelstein and Michael Copps (D) appending the longest commentary. Copps couldn't help linking the practice to ownership consolidation and promised that he would be monitoring the situation going forward. Included in each consent decree is a list of prohibited and limited activities germane to the payola rules. It is worthwhile reading (for your attorney, at the very least), so we are providing this laundry list intact from the CBS Radio consent decree under the click.

Payola guidelines

1. Prohibited Activity.

A. Record Label and Record Label Employees. Neither Company, any Company Station, nor any Company employee (collectively, "Company Parties") shall solicit, receive, or accept cash or any other item of value from a Record Label or Record Label employee in, or as part of, an exchange, agreement, or understanding to provide or increase airplay of music provided by any Record Label, except as expressly permitted under Section 2, below, and provided that all such activity complies with applicable Sponsorship Identification Laws. As used in these Business Reforms, the term "Record Label" means (a) any entity that manufactures or distributes audio recordings of music, (b) any artist under contract to a Record Label (an "Artist"), and (c) any representative of the Record Label or an Artist, including independent promoters.

B. Independent Music Promoters. Company Parties shall not accept any item of value from an independent music promoter, unless that promoter certifies in writing to Company that no compensation to the promoter from a Record Label is based upon airplay.

2. Permissible Restricted Activity. Company Parties may engage in the following activities with Record Labels, subject in each case to compliance with the Sponsorship Identification Laws and the following restrictions, and to adherence with the disclosure and documentation requirements set forth in Section 3 below.

A. Contests or Giveaways: Company Parties may solicit, receive and accept items of value, including but not limited to promotional items, gift cards, CDs, gift certificates, concert tickets, airfare, hotel rooms, vouchers and cash, from Record Labels to give away on the air, at a Company Station event or promotion, or for the benefit of charity, to persons or entities other than Company employees (or members of their immediate families or households). Contest rules and on-air announcements relating to such contests shall clearly indicate the value of the prize(s) as required by FCC rules and identify the Record Label as the provider of the prize(s) to be awarded.

B. Advertising: Company Parties may solicit, receive and accept payment (in cash or other items of value) from Record Labels for on-air advertising, provided that the announcement clearly identifies the Record Label as the sponsor of the advertisement.

C. Other Commercial Transactions: Company Parties may enter into commercial transactions with Record Labels pursuant to which a Company and a Record Label may license, sell or otherwise agree to distribute or promote the Record Labels' Artists, songs or records.

D. Artist Appearances and Performances: Company Parties may arrange for Artists to appear or perform at events or interviews, including under circumstances where a Record Label has subsidized reasonable costs related to the appearance, performance or interview. Company Stations' on-air announcements of an Artist's performance that is subsidized in any part by the Record Label shall indicate clearly that the Artist's appearance is sponsored by the Record Label. The broadcast on a Company Station of all or a portion of the Artist's live performance at the event is permitted, provided that any such broadcast complies with the Sponsorship Identification Laws.

E. Nominal Consideration: Company Parties may solicit, receive and accept the following items of value from Record Labels for use by a Company Station:

(i) CDs and other promotional items of nominal value. A Company Station may solicit, receive and accept from Record Labels: (A) electronic copies of songs and up to 20 copies of the same CD to familiarize Company employees with recordings; (B) electronic copies of recordings for posting on Company Station websites to familiarize visitors to such websites with the Artists' recordings, and (C) promotional items intended for the personal use of Company Parties, if the value of each such individual item does not exceed $25, such as T-shirts, key chains, coffee mugs, baseball hats, posters, pens and bumper stickers.

(ii) Concert tickets. A Company Station may solicit, receive and accept up to 20 tickets (which may include associated backstage or "VIP"-type passes) for a single-day concert, for each day of a multi-day concert, and/or to an industry event to be used by Company employees to familiarize them with the performing Artists. Tickets provided by Record Labels for Company employees who are working at the concert and/or industry event (e.g., technicians, on-air talent, promotions staff, etc.) shall be subject to the disclosure and documentation provisions of Section 3, below, but shall not be counted towards the 20 ticket limit.

(iii) Modest personal gifts for life event, professional achievement and holidays, or gifts commemorating achievement by Company or a Record Label. Company employees may receive and accept reasonable gifts from a Record Label commemorating life events, professional achievements and holidays. A "reasonable" gift is one whose value the employee has no reason to believe is greater than $150. An example of a life event would include a birthday, wedding or the birth of a child. An example of a professional event would be a job promotion or the winning of a music industry award. A Company Station may receive and accept from a Record Label gifts that commemorate achievements of Company, the Company Station, the Record Label, or the Record Label's Artists. An example of such a gift would be a plaque commemorating an Artist's achieving "gold record" level sales.

(iv) Meals and entertainment. Company employees may receive and accept meals and entertainment in an amount not to exceed $150 per person, per event, provided that the event is attended by a Record Label employee and has a legitimate business purpose, and any payment is consistent with the value of the meal or entertainment. Company employees may receive and accept meals and entertainment from a Record Label in an amount that exceeds $150 per person, provided that the event is attended by a Record Label employee, has a legitimate business purpose, and is approved in writing by the Compliance Officer, as provided in the accompanying Compliance Plan. A Company employee may also receive and accept meals and entertainment from a Record Label for the benefit of his/her spouse or "significant other" accompanying the employee at such occasion, consistent with and subject to the limitations of this provision.

(v) Travel and lodging expenses. A Company Station may receive and accept from a Record Label reasonable travel and lodging expenses for Company employees to attend live performances or appearances by Artists for the purpose of familiarizing such employees with a Record Label's Artists. A Company Station may also receive and accept from a Record Label reasonable travel and lodging expenses to industry events if the Company Station provides, to the satisfaction and approval of the Compliance Officer, a legitimate business purpose underlying the Record Label's payment of such expenses. Each Company Station shall be limited to 20 such trips annually, to be allocated among Company employees at the discretion of the Company Station. For purposes of these Business Reforms, "reasonable travel and lodging expenses" means commercial airfare (coach class), train or car service and a sufficient number of nights lodging to accomplish the intended business purpose. All travel and lodging expenditures must be approved in advance and in writing by the Compliance Officer. A Company employee may also receive and accept meals and entertainment during such trips, consistent with and subject to Section 2E(iv), above.

F. Nothing herein shall prohibit a natural increase in airplay of an Artist's music during the period surrounding, and coincident with (i) a contest or giveaway that promotes that Artist and (ii) the Artist's appearance or performance at an event, provided that, to the extent the increase in airplay results from an agreement or understanding with the Record Label or Artist, such increased airplay shall comply with the Sponsorship Identification Laws.

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