Universal Fined a Record to Settle Payola Claims
CHARLES DUHIGG 12/5/2006, URL:
www.latimes.com/business/la-fi-uni12may12,1,7550482,full.story
More than $12 million will end allegations in New York that radio employees were bribed.
Universal Music Group, the world's largest record company, has agreed to pay more than $12 million to settle allegations that in exchange for airplay it bribed radio programmers with vacations, electronics and cash, New York Atty. Gen. Eliot Spitzer said Thursday.
The fine against Universal Music, which releases nearly 1 in every 3 of the albums sold in the United States, is the largest paid by a record company to settle claims of so-called pay for play.
Universal Music did not admit guilt in settlement documents released by Spitzer. But the Santa Monica-based company, a unit of French company Vivendi, did acknowledge that some employees "pursued some radio promotion practices that were wrong and improper." The company agreed to stop offering gifts and cash in return for airplay of its artists, who include Lindsay Lohan and Ashlee Simpson.
Echoing statements he made last year when two other music companies agreed to similar settlements, Spitzer said he believed that pay for play was accepted and encouraged not just by promotional employees but by those at all levels of Universal Music. In settlement documents, he wrote that gifts and cash were "so fundamental to UMG's success as a record company that senior label executives have frequently been involved."
In one instance cited by Spitzer, a Universal Music executive allegedly attempted to disguise a 2004 bribe for airplay of songs by the band Limp Bizkit by falsifying a letter from a Rochester, N.Y.-area radio employee thanking the company for giving a listener an iPod.
The supposed letter writer's name was misspelled and the letterhead contained an out-of-service area code. The radio employee later told Spitzer's investigators that he hadn't written the note. It is unclear what was allegedly given to the radio station in exchange for airplay.
Other documents released by Spitzer allege that Universal Music executives gave Yankee tickets and Target gift certificates to radio programmers in return for adding artists to playlists.
Thursday's announcement was part of Spitzer's multi-faceted campaign to expose the secret quid pro quos that can dictate what songs radio listeners hear. Last year, Spitzer announced settlements with record companies Sony BMG Music Entertainment and Warner Music Group for a combined $15 million. Investigations of Britain's EMI Group and various radio corporations are continuing.
There's no better way to sell records than getting songs played on the radio. And for that reason, pay for play has plagued the music industry since the 1930s, with disc jockeys at times accepting cash, drugs or the services of prostitutes in exchange for airplay.
In 1960, Congress passed laws banning broadcasters from taking cash or anything of value in exchange for playing specific songs unless they disclosed the transactions to listeners. Spitzer launched his investigation based on similar statutes passed by the New York Legislature.
Despite such laws, pay for play is "pervasive within the music industry and by no means unique to UMG," Spitzer said in the settlement.
Universal Music owns such labels as Interscope Geffen A&M Records, Island Def Jam Music Group, Universal Motown Records Group, UMG Nashville and Verve Music Group.
The company, home to such artists as U2 and Lynyrd Skynyrd, said in a statement Thursday that the company had "been working cooperatively with the attorney general's office in resolving these promotion issues and are pleased to have completed the process with this agreement. The reforms that we have agreed to with the attorney general are consistent with the policies that we voluntarily implemented over a year ago."
Sources close to the attorney general's office, however, said Universal Music's settlement was delayed because the company's attorneys had battled to prevent access to certain documents and argued that Universal Music should receive a smaller fine than the $10 million paid by Sony BMG last year.
Sources at Universal Music who requested anonymity for fear of angering Spitzer disputed those characterizations, saying that the company had merely argued that many of the practices cited in Thursday's settlement documents
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