Payola’s big payout

UMG settles N.Y. probe for $12 million

Universal Music Group has become the third major music distributor to settle a New York payola probe, offering to pay a $12 million fine and end “pay for play” practices.

New York state Attorney General Eliot Spitzer announced the settlement Thursday, slapping the world’s largest record company with the largest fine in his radio airplay investigations. Previously, Sony BMG paid $10 million, Warner Music $5 million; all the monies are given to charity.

Spitzer’s investigation determined that Universal and its record labels offered a series of inducements to radio stations and their employees to obtain airplay. Among the artists mentioned who benefited from the “pay for play” system were Nick Lachey, Ashlee Simpson, Brian McKnight and Lindsay Lohan. Universal Music Group labels include Interscope, Geffen, A&M, Island, Def Jam and Motown.

Settlement requires UMG to cease payments and other inducements to radio stations, discontinue the employment of indie promoters, hire a compliance officer and implement an internal system to detect future abuses. The attorney general’s office, Spitzer reported, obtained emails showing that Universal execs were aware of payoffs and employees were trained and pressured to purchase airplay.

“We have 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,” UMG said in a statement. “The reforms that we have agreed to with the attorney general are consistent with the policies that we voluntarily implemented over a year ago.”

Probe discovered that Universal’s radio strategy included bribes in the form of electronics, trips and sports/entertainment tickets to radio station programmers; payments to cover operational expenses and contest giveaways; retention of indie promoters as conduits for illegal payments to stations; and payments for airplay under the guise of advertising.

The investigation connected airtime in Albany, N.Y., for McKnight’s “Shoulda, Coulda, Woulda” with a radio programmer’s use of a Miami hotel room that was listed as a contest prize for accounting purposes. The same programmer also received a Manhattan hotel room and Yankees tickets for playing a Lachey tune.

When Spitzer first released findings of his investigation in July, emails led to smoking guns within Sony Music’s Epic and Columbia Record labels and to the presentation of trips and merchandise to radio workers in small Eastern markets. Spitzer released none of those specifics in connection with the UMG report.

As with all the investigations, the music company does not acknowledge guilt but does admit individuals were partaking in illegal practices. UMG will also pay $100,000 to cover the costs of the investigation.

Spitzer’s office said the investigation continues and all eyes are on EMI.

Spitzer sued Entercom Communications earlier this year, accusing the radio company’s personnel of accepting cash payments for airplay. Entercom denied the allegations and reportedly rejected Spitzer’s proposal of a $20 million settlement. In addition, last month the FCC extended its own investigations into payola practices at Clear Channel, Citadel Broadcasting and CBS Radio after Spitzer’s office had subpoenaed each of them.

The $12 million from UMG will be distributed through the Rockefeller Philanthropy Advisors.

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