Sony BMG Music Entertainment, one of the world's largest record companies, agreed today to stop providing lavish gifts, free trips and other giveaways in exchange for airtime for its artists on radio stations, under the terms of a settlement with the New York attorney general's office.
The settlement, which includes a $10 million payment to a fund for music education, is the first in a broad investigation by Eliot Spitzer, the New York attorney general, into incentives that record companies offer to radio stations in hopes of getting airtime that will raise their artists' profiles, increase a song's ranking and, of course, drive up sales.
"This agreement is a model for breaking the pervasive influence of bribes in the industry," Mr. Spitzer said in a statement. "Contrary to listener expectations that songs are selected for airplay based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees."
Sony BMG, which represents Jessica Simpson and Jennifer Lopez, among dozens of others, admitted to the misconduct in a statement. "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," the company said. "SONY BMG looks forward to defining a new, higher standard in radio promotion."
It also suggested that such practices were common in the industry, even though state and federal laws bar record labels from paying radio stations for air time. "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," the statement said.
In addition to Sony BMG, a unit of Sony and Bertelsmann, Mr. Spitzer's office served subpoenas late last year to the Universal Music Group, a unit of Vivendi Universal; the EMI Group; and the Warner Music Group. The attorney general sought copies of contracts, billing records and internal memos; it also questioned senior executives at Sony.
The attorney general said that the enticements took several forms. Station programmers received bribes like computer laptops and vacation packages, or the label sponsored contests for a station's listeners. In other cases, Sony BMG paid some of a station's day-to-day expenses, or it hired middlemen known as independent promoters to make illegal payments to radio stations. Some Sony BMG employees also tried to hide payments to station employees by recording them as prizes to non-existent contest winners, the attorney general said.
Investigators disclosed letters and e-mail messages showing the kinds of payoffs at issue. In a letter dated Feb. 6, 2003, a promotions executive lists songs that the company wants played and payment terms for each such "add" to a station's playlist. "We will continue to send you a weekly 'priority' sheet that will direct you and your staff accordingly," the executive writes. "An add shall be defined, and payment will only be generated, after a station has spun a song for 56 times in a 4 week period, in the 6 a.m. to 12 midnight daypart."
In an e-mail sent in January 2003, an irate promotions employee instructs a colleague to withhold a free trip, known as a "flyaway," from stations that bury Celine Dion's "I Drove all Night" in its overnight rotation of songs. Written all in capital letters, it read:
"OK, HERE IT IS IN BLACK AND WHITE AND IT'S SERIOUS: IF A RADIO STATION GOT A FLYAWAY TO A CELINE SHOW IN LAS VEGAS FOR THE ADD, AND THEY'RE PLAYING THE SONG ALL IN OVERNIGHTS, THEY ARE NOT GETTING THE FLYAWAY. PLEASE FIX THE OVERNIGHT ROTATIONS IMMEDIATELY."
Soon after the attorney general's office began its investigation, Sony BMG started reining in such promotional tactics, and it said today that it would not only stop paying for airplay but would disclose any expensive gifts from now on. The company will hire a compliance officer to monitor its progress and to create a system for detecting abuses.
Ann Chaitovitz, director of sound recordings for the American Federation of Television and Radio Artists, said in a statement that the federation thanked Mr. Spitzer "for examining this pernicious issue" and that "pay-for-play hurts both recording artists and the public." She added: "We look forward to his continuing investigation of the other record labels."
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