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Sony Agrees to $10M 'Payola' Settlement
Monday July 25, 7:51 pm ET
By Erin Mcclam, Associated Press Writer
Sony BMG Music Entertainment Agrees to $10 Million 'Payola' Settlement

NEW YORK (AP) -- Recording industry titan Sony BMG Music Entertainment agreed Monday to pay $10 million and stop bribing radio stations to feature its artists in what a state official called a more sophisticated generation of the payola scandals of decades ago.
The agreement springs from an investigation by New York state Attorney General Eliot Spitzer, who called the practice "pervasive" in the industry and suggested other music industry giants could face similar penalties.

Pay-for-play "is driving the industry, and it is wrong," Spitzer told reporters.

Sony BMG, whose various labels include hundreds of artists from Aretha Franklin and Tony Bennett to Beyonce Knowles and the Dixie Chicks, said in a statement some of its employees had engaged in "wrong and improper" practices.

The company said it looked forward to "defining a new, higher standard in radio promotion," but did not say whether it had fired or disciplined any of those employees. A spokeswoman did not return a call for further comment.

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.

Asked why he did not bring criminal charges in the case, Spitzer noted the criminal laws governing pay-for-play are more specific and difficult to violate than the civil laws.

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.

Spitzer said Sony BMG's efforts to win more airplay took many forms, including outright bribes of cash and electronics to radio stations and paying for contest giveaways for listeners. In other cases, he said, Sony BMG used middlemen known as independent promoters to funnel cash to radio stations.

The attorney general called the system more sophisticated than the 1950s and '60s payola scandals, most of which involved direct payments of cash to DJs in exchange for airplay.

"This is a more formalized, more corporatized structure to get the same result," he said. He added, "I feel a little like Bill Murray in the movie 'Groundhog Day,'" a story about a cynical weatherman who is forced to continuously relive the worst day of his life.

Jonathan Adelstein, a Democratic member of the Federal Communications Commission, said Spitzer "appears to have found a whole arsenal of smoking guns."

"We need to investigate each particular instance that Spitzer has uncovered to see if it is a violation of federal law. This is a potentially massive scandal," he said.

The FCC has power over the nation's radio stations, which are licensed to use public airwaves.

In the Sony BMG case, Spitzer released to reporters e-mails, most of them dated 2003, 2004 and 2005, that he said showed company executives were well aware of the payola practices.

In one case, an employee of Sony BMG's Epic label was trying to promote the group Audioslave to a station and asked: "WHAT DO I HAVE TO DO TO GET AUDIOSLAVE ON WKSS THIS WEEK?!!? Whatever you can dream up, I can make it happen."

In another case in 2004, the promotion department of Sony BMG label Epic Records paid for an extravagant trip to Miami for a Buffalo DJ and three friends in exchange for adding the Franz Ferdinand song "Take Me Out" to the DJ's station's playlist.

And in another, a program director for Clear Channel radio station WKKF-FM, or KISS-FM, sent an e-mail to a Sony executive saying: "Looking for a laptop for promotion on Bow Wow," a reference to a rapper.

Spitzer said Sony BMG employees sought to conceal some payments by using fictitious contest winners to document the transactions.

Still, he praised Sony BMG executives for fully cooperating with the inquiry.

Spitzer has asked for documents from three other major recording industry names -- EMI, Warner Music Group and Vivendi Universal SA's Universal Music Group. While Spitzer would not talk specifically about investigations into those companies, he said the payola problem goes "way beyond Sony BMG."

Don Henley of the Eagles, a founding member of the Recording Artists Coalition, praised Spitzer for addressing a problem that hurts recording artists.

"We look forward to other record labels agreeing to similar reforms," said Henley, who has given $25,000 in campaign contributions to Spitzer over the past year. Spitzer is running for governor in 2006.

The president of the American Association of Independent Music, Don Rose, said the settlement will give new opportunity to musicians struggling for airplay.

"With a level playing field, the airwaves can better reflect the impact of indie labels and artists," he said.

Sony BMG is a joint venture of Sony Corp. and Germany's Bertelsmann AG. Shares of Sony were down 23 cents to close at $34.40 Monday on the New York Stock Exchange.

Sony BMG is an umbrella organization for several prominent record labels, including Arista Records, Columbia Records, Sony Music International and Jive Records. Star artists signed with the Arista label alone include Whitney Houston, OutKast, Pink and Sarah McLachlan.

The $10 million will be distributed to not-for-profit entities and earmarked for music education programs, Spitzer said.

Associated Press Writer Michael Gormley in Albany, N.Y., contributed to this report.

Sony BMG Music Entertainment: http://www.sonybmg.com

Spitzer: http://www.oag.state.ny.us

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