The world’s largest record company is ready to give back after being accused of giving too much.
New York Attorney General Eliot Spitzer announced Thursday that Universal Music Group has agreed to a $12 million settlement in the payola case against the company, which stated that the label gave vacations, gifts and other “outright bribes” to radio stations to ensure airtime for artists such as Nick Lachey, Ashlee Simpson, Lindsay Lohan and Brian McKnight.
The $12 million is going to the Rockefeller Philanthropy Advisors, which will dole the money out to various New York nonprofits. Universal will also shell out $100,000 to cover the cost of the investigation and promote further music industry reforms.
While Universal copped to “various employees and independent promoters acting on behalf of the company” behaving inappropriately, the label itself has not admitted guilt in the matter.
“We have been working cooperatively with the attorney general’s office in resolving these promotion issues and are pleased to have completed the process with this agreement,” Universal said in a statement. “The reforms that we have agreed to with the attorney general are consistent with the policies that we voluntarily implemented over a year ago.”
The record company has agreed to stop all illegal payments as well as the hiring of independent promoters who provided the incentives to radio stations. Universal will also bring a compliance officer onboard to regulate promotional campaigns.
Papers filed by Spitzer in New York State Supreme Court alongside the settlement deal still points the finger at the label as a whole, however. Universal comprises Island Def Jam, Interscope, Universal Motown Recordings and Verve Music Group, among others.
“UMG has illegally provided radio stations with financial benefits to obtain airplay and boost the chart position of its songs,” Spitzer stated. “UMG has obtained airplay for its songs through such deceptive and illegal practices as bribing radio station employees, on occasion, to play UMG songs, providing a stream of financial benefits to radio stations, to assist with stations’ overhead costs or to provide promotional support, on condition that UMG records receive airplay.”
New York’s top legal honcho also accused the company, which holds nearly 26 percent of the world’s music market and sells one out of every three albums bought in the United States, of using interns and other employees to run fake call-in campaigns to increase the number of times a song hit the airwaves.
Shady dealings Universal was accused of include putting up a WFLY-FM program director in a Miami hotel in 2003 and 2004 in return for adding McKnight’s “Shoulda, Coulda, Woulda” and a Nick Lachey song to the station’s playlist. The aforementioned WFLY employee also reportedly scored Yankees tickets for spinning the Lachey tune.
We know what you’re thinking. Nick Lachey put out a song in 2004?
Spitzer also said that, in July 2004, Island Def Jam paid employees $3,500 for six weeks to run a phony call-in campaign to boost airplay for Ashanti’s “Rain on Me.” According to the attorney general, WGCI-FM in Chicago and WQHT in New York received 25 calls apiece during the first two weeks and 40 calls were made to those two stations and a handful of others in the next four weeks.
Island Def Jam also hired people to hype Ludacris’ “Stand Up” at stations in Buffalo, Rochester and elsewhere in New York, Spitzer said.
“Consumers have a right not to be misled about the way in which the music they hear on the radio is selected,” Spitzer told reporters. “Pay-for-play makes a mockery of claims that only the ‘best’ or ‘most popular’ music is broadcast.”
Spitzer, currently the Democratic frontrunner in this year’s race for New York governor, has had the music industry quaking in its boots since taking over the attorney general’s office in 1998 and becoming a vigilant defender of artists’ rights and fair business dealings.
His widespread subpoenas have uncovered a number of dirty dealings. After launching an investigation into alleged illegal activity among record labels and radio stations, Sony BMG agreed to halt further illegal radio promotions and settled for $10 million in July 2005. The agreement prohibits Sony employees from passing out gifts valued at more than $150 to radio stations.
Warner Music Group agreed to a $5 million settlement in November. Spitzer sued Entercom Communications Corp. earlier this year, accusing the media firm of trading cash for airplay, and Entercom has denied the charges and nixed the idea of a $20 million fine.
A two-year investigation into music labels’ accounting practices also turned up misplaced funds– Universal Music, Sony Music, EMI, BMG and Warner Music ended up joining forces in 2004 to locate artists they may have stiffed on royalty payments. The unpaid royalties amounted to more than $50 million. Any unaccounted for money was to go to the state.
Spitzer is also currently investigating the U.K.’s EMI Group, home to Virgin Records, Apple Records and a long list of niche labels.
The Dirty Harry of the music biz issued subpoenas earlier this year to radio giants Clear Channel Communications, CBS Radio Inc., Entercom and Citadel Broadcasting Corp. to investigate charges that they accepted goodies like flat-screen TVs and cash in exchange for showing certain songs special attention.
To Spitzer’s consternation, the FCC has started informal negotiations to settle with these companies. Spitzer told the Los Angeles Times last month that federal regulators were going behind his back and could undercut his efforts to really make a difference in how the music industry conducts itself.
“The radio conglomerates want to settle on the cheap with the Feds and unfortunately the FCC, contrary to good public policy, has not pursued an investigation of the underlying facts,” he said.
Credit: E! Online