Calling illegal payola to radio stations “pervasive” and “a major problem throughout the music industry,” New York State Attorney General Eliot Spitzer on Monday announced a settlement with Sony BMG Music Entertainment relating to the music giant’s radio promotion practices.

Sony BMG — whose promotion practices are damningly depicted in documents released by Spitzer’s office — agreed to tighten its promotion guidelines and will pay a $10 million fine. The money will be distributed by the Rockefeller Philanthropy Advisors to New York nonprofit organizations.

The company, home to such acts as Kelly Clarkson, System of a Down and Bruce Springsteen, also agreed to pay $100,000 toward the cost of Spitzer’s investigation.

In compliance with an “assurance of discontinuance” signed Friday by Sony BMG executive vp/global general counsel Daniel Mandil, the label acknowledged it had engaged in payola activities.

Sony BMG’s statement said, “Despite federal and state laws prohibiting unacknowledged payment by record labels to radio stations for airing of music, such direct and indirect forms of what has been described generically as ‘payola’ for spins has continued to be an unfortunately prevalent aspect of radio promotion.

“Sony BMG acknowledges that various employees pursued some radio promotion practices on behalf of the company that were wrong and improper, and apologizes for such conduct. Sony BMG looks forward to defining a new, higher standard in radio promotion.”

Monday’s agreement is the first such arrangement reached as a product of Spitzer’s yearlong investigation of promotion practices in the music business. The attorney general also has subpoenaed documents and deposed executives from the other three majors: Universal, EMI and Warner.

“We are far along with the other major labels,” Spitzer said Monday. “We have received documents and are deep in conversations with them. I would hope that what you’re seeing today is viewed as the threshold which they will all meet and enforce.”

Paying for airplay, which first came to light during federal hearings in 1959, is an abuse that has maintained itself over the years, Spitzer said. Employing former New York Yankees star Yogi Berra’s oft-repeated malapropism, he called the current state of affairs “deja vu all over again.”

Spitzer continued: “Payola is corrosive to the integrity of competition. It is corrosive to the music industry. It is corrosive to the radio industry . . . This is a story that has been told many times in the past. It is not new. It takes many different forms. But it is essentially the same scam where — instead of airing music based upon the quality, based upon artistic competition, based upon aesthetic judgments or other judgments that are being made by radio stations — radio stations are airing music because they have been paid to do so in a way that has not been disclosed to the public. This is wrong, and it is illegal.”

However, Spitzer did not lay all the blame for payola at the feet of the major labels, saying that radio stations were “the ones who are most fundamentally violating the public trust.”

He added: “I would encourage the FCC to take a very hard look at whether something that is this pervasive, something that is so corrosive to the integrity of the marketplace, should not merely be investigated or pursued but whether some of these stations deserve to have their licenses stripped. That may seem like a drastic remedy, but they know what the law is.”

Spitzer said FCC commissioner Jonathan Adelstein had expressed “great interest” in the situation. Later Monday, Adelstein called for an immediate federal investigation of payola practices.

The Sony BMG agreement and nearly 60 pages of documents released by Spitzer’s office paint a dark picture of the label’s involvement in promotion abuses.

The agreement notes bluntly, “Sony BMG has illegally provided radio stations with financial benefits to obtain airplay and boost the chart position of its songs.” The company’s activities included outright bribery, mounting free concerts and giveaways, making payments to cover station operations expenses and utilizing independent promoters as conduits for illegal payments.

The document names some beneficiaries of Sony BMG’s illegal largesse. Dave Universal, who was fired in January from his post as program director at WKSE in Buffalo, N.Y., received trips to New York, Miami and Ft. Lauderdale, Fla., in return for playing singles by Jennifer Lopez, Good Charlotte and Franz Ferdinand. Programmers in New York, San Diego, Albany, N.Y., and Milwaukee also are cited.

The agreement says independent promotion firms served as a principal conduit of “pay-for-play” money between Sony BMG and radio stations. It notes, “Seniormost executives within the Sony BMG labels’ management team understood the role of independent promoters in Sony BMG’s business, and involved themselves in the labels’ relationship with the indies at strategic junctures.”

Spitzer said Monday: “There will be determinations made by Sony BMG internally about whether or not individuals should or should not be working for the company. We will watch carefully as they do that. I am sure they will do what is right.”

“Spin programs” — paid “advertising spots,” usually in overnight radio slots, which are detected electronically as regular spins by airplay chart tabulators — also are excoriated as pay-for-play scams by Spitzer. The agreement notes that recipients of recent spin programs included such top Sony BMG acts as Jessica Simpson, John Mayer, Maroon5, Good Charlotte and Switchfoot.

The agreement also said Sony BMG orchestrated fraudulent call-in request campaigns to gain additional airplay for its acts. The company utilized its own interns and outside firms to pose as “listeners” requesting certain current singles.

Credit: Reuters