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Sony BMG to Settle New York Payola Investigation
Music giant makes a deal with New York Atty. Gen. Eliot Spitzer over case involving payments for airtime
By Charles Duhigg and Walter Hamilton, Times Staff Writer
Sony BMG Music Entertainment, the nation's second-largest music company, is expected as early as Monday to agree to a settlement with New York Atty. Gen. Eliot Spitzer in an ongoing payola investigation, said sources familiar with the talks.
Representatives of Sony BMG and Spitzer declined to detail ongoing discussions, but sources said the terms of the settlement might include promises that Sony BMG would not engage in certain practices and fines that might exceed $10 million. The sources requested anonymity because of the confidentiality of the discussions.
Sony BMG is one of at least four record companies Spitzer subpoenaed last fall as part of his inquiry into whether music corporations are skirting payola laws by hiring intermediaries to influence which songs are heard on public airwaves. Should Sony BMG reach an accord with Spitzer, it would be the first settlement in the investigation.
Insiders at other record companies said they expected that a Sony BMG settlement would spur other music corporations to agree to similar deals with Spitzer's office. Those executives said whatever fine Sony BMG might accept probably would also set the standard for other companies, which would be fined in proportion to each company's share of the U.S. market.
Last September, investigators in Spitzer's office subpoenaed executives at the four major record corporations -- Universal Music Group, Sony BMG, Warner Music Group and EMI Group -- to request copies of billing records, contracts, e-mails and other correspondence regarding the companies' relationships with independent music promoters who suggest new songs to radio programmers.
Those intermediaries have long been suspected of passing payments to deejays in exchange for airplay of specific songs. Such payments would violate a federal statute known as the payola law, which prohibits broadcasters from taking cash or anything of value in exchange for playing specific songs, unless they disclose the transaction to listeners.
In May, Sony BMG divulged that at least a dozen executives, including Sony Music U.S. President and Chief Executive Donnie Ienner, had received subpoenas.
Since Spitzer's investigation began, the three other record companies have circulated internal memos outlining unacceptable promotion practices company insiders said.
Radio airplay is considered the most powerful promotional tool for record companies. In the past, labels blatantly traded cash, drugs and prostitutes for airplay.
Today, record companies pay independent promoters to persuade radio programmers to spin particular songs.
The independent promoters pay radio stations annual fees, sometimes in excess of $100,000, in exchange for advance copies of the stations' playlists. Promoters say these fees do not influence a radio station's choice of songs. However, critics suggest that the payments are a way to skirt the law.
Last November, Infinity Broadcasting Corp., the nation's second-largest radio broadcaster, fired a programmer suspected of accepting gift certificates from an independent promoter. In January, Entercom Communications Corp., another radio broadcaster, fired a top programming executive amid an internal investigation into whether he accepted travel packages and other gifts directly from record label executives.
Since then, Infinity announced that it would sever the company's ties with independent promoters. Radio heavyweight Clear Channel Communications Inc. announced in 2003 that it would not renew contracts with independent promoters
Music giant makes a deal with New York Atty. Gen. Eliot Spitzer over case involving payments for airtime
By Charles Duhigg and Walter Hamilton, Times Staff Writer
Sony BMG Music Entertainment, the nation's second-largest music company, is expected as early as Monday to agree to a settlement with New York Atty. Gen. Eliot Spitzer in an ongoing payola investigation, said sources familiar with the talks.
Representatives of Sony BMG and Spitzer declined to detail ongoing discussions, but sources said the terms of the settlement might include promises that Sony BMG would not engage in certain practices and fines that might exceed $10 million. The sources requested anonymity because of the confidentiality of the discussions.
Sony BMG is one of at least four record companies Spitzer subpoenaed last fall as part of his inquiry into whether music corporations are skirting payola laws by hiring intermediaries to influence which songs are heard on public airwaves. Should Sony BMG reach an accord with Spitzer, it would be the first settlement in the investigation.
Insiders at other record companies said they expected that a Sony BMG settlement would spur other music corporations to agree to similar deals with Spitzer's office. Those executives said whatever fine Sony BMG might accept probably would also set the standard for other companies, which would be fined in proportion to each company's share of the U.S. market.
Last September, investigators in Spitzer's office subpoenaed executives at the four major record corporations -- Universal Music Group, Sony BMG, Warner Music Group and EMI Group -- to request copies of billing records, contracts, e-mails and other correspondence regarding the companies' relationships with independent music promoters who suggest new songs to radio programmers.
Those intermediaries have long been suspected of passing payments to deejays in exchange for airplay of specific songs. Such payments would violate a federal statute known as the payola law, which prohibits broadcasters from taking cash or anything of value in exchange for playing specific songs, unless they disclose the transaction to listeners.
In May, Sony BMG divulged that at least a dozen executives, including Sony Music U.S. President and Chief Executive Donnie Ienner, had received subpoenas.
Since Spitzer's investigation began, the three other record companies have circulated internal memos outlining unacceptable promotion practices company insiders said.
Radio airplay is considered the most powerful promotional tool for record companies. In the past, labels blatantly traded cash, drugs and prostitutes for airplay.
Today, record companies pay independent promoters to persuade radio programmers to spin particular songs.
The independent promoters pay radio stations annual fees, sometimes in excess of $100,000, in exchange for advance copies of the stations' playlists. Promoters say these fees do not influence a radio station's choice of songs. However, critics suggest that the payments are a way to skirt the law.
Last November, Infinity Broadcasting Corp., the nation's second-largest radio broadcaster, fired a programmer suspected of accepting gift certificates from an independent promoter. In January, Entercom Communications Corp., another radio broadcaster, fired a top programming executive amid an internal investigation into whether he accepted travel packages and other gifts directly from record label executives.
Since then, Infinity announced that it would sever the company's ties with independent promoters. Radio heavyweight Clear Channel Communications Inc. announced in 2003 that it would not renew contracts with independent promoters
