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Warner Second To Settle In Payola Investigation
By Mi2N
(more articles from this author)
2005-12-15
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Attorney General Eliot Spitzer announced the second settlement in the music industry's "pay-for-play" probe.

Warner Music Group Corp., the third largest record company in the United States, has agreed to abandon the industry-wide practice of providing radio stations and their employees with financial incentives and promotional items in exchange for "airplay" for Warner's recordings.

Such payoffs violate state and federal law.

"Warner is the second major player in the music industry to come forward and acknowledge that these practices are wrong," Spitzer said. "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."

This is the second settlement stemming from Spitzer's payola investigation, where he has uncovered a rampant industry practice of record labels offering streams of financial inducements to radio stations and their employees to obtain airplay for the recordings by Warner's artists.

The financial benefits provided in exchange for airplay, also known as "payola," took several forms:

* Direct bribes to radio programmers, including airfare, electronics, tickets to premier sporting events and concerts;
* Payments to radio stations to cover operational expenses;
* Radio contest giveaways for stations' listening audiences, including flyaways, concert tickets, iPods, gift certificates and gift cards;
* Hiring independent promoters to act as conduits for illegal payments to radio stations;
* Purchasing "spin programs" to artificially increase the airplay of particular recordings.

The Assurance of Discontinuance summarizing the Attorney General's findings alleges that the illegal payoffs for airplay were designed to manipulate record charts, generate consumer interest in records and increase sales.

Under the Assurance, Warner, building on guidelines it issued earlier this year in response to the AG's investigation, has agreed to stop making payoffs in return for airplay and to make full disclosure of all items of value provided to radio stations.

The company has also issued a statement acknowledging its improper conduct and pledging to abide by a higher standard.

In addition, the company has agreed to provide $5 million for distribution by Rockefeller Philanthropy Advisors to New York State not-for-profit entities in a manner that will inure to the benefit of the residents of the State of New York by funding programs aimed at music education and appreciation.

Last summer, Spitzer entered into a similar settlement with SONY BMG MUSIC ENTERTAINMENT.

The investigation and settlement were handled by Assistant Attorneys General Geneva M. Johnson and Lourdes M. Ventura, under the direction of Terryl Brown Clemons, Assistant Deputy Attorney General for the Division of Public Advocacy.

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