Warner Music Group Corp. has agreed to pay $5 million to settle an investigation into payoffs for radio airplay of artists, New York Attorney General Eliot Spitzer said Tuesday.
Warner is the second major recording company to reform and settle with Spitzer in a practice the attorney general called industrywide.
“Unfortunately, other companies continue to engage in them. I applaud Warner’s decision to halt this conduct, cooperate fully with my office, and adopt new business practices,” he said.
Spitzer has called the practice “pervasive” in the industry.
The money that Warner Music has agreed to pay will be distributed by the Rockefeller Philanthropy Advisors to New York State to fund music programs in the state.
“The reforms we have agreed to with the attorney general are consistent with the internal reforms that our new management team implemented earlier this year,” said Warner Music spokesman Will Tanous. “We consider this to have been a valuable process. From our perspective, radio cannot be too consumer-driven. The music that people hear on the radio always should represent the highest quality the industry has to offer.”
A 1960 federal law and related state laws bar record companies from offering undisclosed financial incentives in exchange for airplay. The practice was called “payola,” a contraction of “pay” and “Victrola,” the old wind-up record player.
In July, industry titan Sony BMG Music Entertainment agreed to pay $10 million and stop bribing radio stations to feature artists in what a state official called a more sophisticated generation of the payola scandals of decades ago. Sony BMG had said some of its employees had engaged in “wrong and improper” practices.
Spitzer said he hadn’t sought criminal charges in the Sony case because criminal laws governing pay-for-play are more specific and difficult to violate than the civil laws.
In July, federal regulators began taking a closer look at the payola scandal that led to Spitzer’s $10 million settlement by Sony BMG Music Entertainment. Federal Communications Commission Chairman Kevin Martin promised swift action against anyone violating rules against “pay-for-play” in the music industry.
He said, however, that the practice “may not be widespread.”
Companies in the recording industry depend heavily on airplay for their artists. It boosts sales by encouraging listeners to buy their music and helps them climb the charts, which are based on airplay.
The practice today is more sophisticated than in the 1950s and ’60s payola scandals, most of which involved direct payments of cash to DJs in exchange for airplay, Spitzer has said.
Payola is in the form of “direct bribes” to radio programmers, including airfare, electronics, iPods, tickets to top sporting events and concerts; as well as payments to radio stations for expenses and for use in contests. He also said companies have hired “independent promoters” to act as conduits for payments to radio stations and pay for “spin programs” to increase airplay of some recordings that are supposed to be based on popularity among listeners.
Last summer, Spitzer asked for documents from EMI Group PLC, Warner Music Group and Vivendi Universal SA’s Universal Music Group.
Credit: AP
Shares of Warner rose 8 cents to $17.48 in midday trading on the New York Stock Exchange.