Warner settles in Spitzer 'payola' probe
By MICHAEL GORMLEY
ASSOCIATED PRESS WRITER
ALBANY, N.Y. -- 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."
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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.
Shares of Warner rose 8 cents to $17.48 in midday trading on the New
York Stock Exchange.
By MICHAEL GORMLEY
ASSOCIATED PRESS WRITER
ALBANY, N.Y. -- 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."
advertising
Click to learn more...
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.
Shares of Warner rose 8 cents to $17.48 in midday trading on the New
York Stock Exchange.
