Record Industry Settles New York Payola Scandal

By Jon Newton 7/26/05

New York attorney general Eliot Spitzer has settled with Sony BMG for alleged payola-style violations.

The record label, the largest member of the Big Four record label cartel, is accused of using “improper tactics” to “influence radio programmers to play its songs, people involved in the discussions said last night,” states the New York Times, going on:

“The agreement between Mr. Spitzer and the record company, Music Entertainment, one of four music conglomerates under investiation [sic], is expected to be announced on Monday, these people said. They cautioned, however, that the talks were continuing and could still break down.”


Jon Newton

However, today, "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," says the San Francisco Chronicle.

"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 other cartel members, Universal Music Group (France), the EMI Group (UK) and the Warner Music Group (USA), have also been subpoenaed.

Last year Spitzer ordered all four (who are suing customers claiming they're 'thieves' and 'criminals' for sharing music online with each other) to return $50 million to musicians they'd had under contract.

Somehow, they'd neglected to pay royalty fees to their musicians.

"Mr. Spitzer’s investigation has echoes of the 'payola' scandals that roiled the music industry early in the rock n’ roll era, in which cash bribes were paid to disc jockeys in exchange for playing certain songs," says the NYT. For the four decades since, federal law has prohibited broadcasters from accepting money or anything of value in exchange for airplay unless the transaction is disclosed publicly.

"But record companies have long used less-subtle means for currying favor with programmers, including sending them on junkets or providing tickets to concerts and sports events. The companies also employed middlemen who paid the radio stations annual fees which they say are not tied to airplay of specific songs."

The cartel members, "also took steps to reduce practices that might be construed as bribery, according to people briefed on the policies," adds the story.

"Sony BMG, for example, said executives could only buy a personal gift, with a cap on the value, for a radio programmer for a 'life event,' like a wedding or the birth of a child, according to people briefed on the policy."

The $10 million will go to not-for-profit entities and music education programs, Spitzer said, according to the Chronicle.

One more note: such hidden payments as of this year clearly violate the Sarbanes-Oxley Act as they are intentially covert and difficult to trace. These are two elements of funny acounting forbidden by the new law. This is a warning to lable stock holders. If these types of things continue it can land the record company CEO into a trial. If that happens the stock will plummet in value. -- editor

 

Jon Newton is the editor of p2pnet.net and is a regular contributer to MP3 Newswire. Jon's site is devoted to the politics of digital music and his insights as well as those of his co-writers can be read there. We urge you to explore it.

 


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