New Settlement in Payola Probe

May 11, 2006 1:15pm

Universal Music has agreed to pay $12 million to charity in settlement of a pay-for-play music suit brought by New York State’s Attorney General–it is the largest settlement to date in Spitzer’s recording industry payola probe, and only one recording company, EMI continues to hold out from Spitzer’s onslaught on business practices.

Two other record companies, Warner Music Group and Sony-BMG, have already settled in the payola probe, Warner for $5 million and Sony BMG for $10 million. The Universal Music Group Recordings Inc.’s settlements appear roughly in proportion to the companies’ shares of the recording industry market where Sony holds a 23.3 percent share and Universal a 31.6 percent share. Warner Music’s penalty is slightly out of proportion to its market share of 18.1 percent.

A related FCC payola investigation, first reported by ABC News Chief Investigative Correspondent Brian Ross, is ongoing into the role of the nation’s largest radio station owners in encouraging questionable business practices, which allegedly deceived consumers into thinking music by popular artists was played based on popularity and not because of promotional gifts, cash contributions and barter for services from the recording companies to the radio conglomerates and to individual stations and station managers.

In the Universal case, New York Attorney General Eliot Spitzer alleged the company provided trips, gifts and other bribes to increase airplay for its artists.

In the settlement, however, Universal did not admit to any wrongdoing. This was also the case in the Warner and Sony-BMG settlements.

However, in the Universal case the company did admit its employees had engaged in illegal business activities.

"UMG has illegally provided radio stations with financial benefits to obtain airplay and boost the chart position of its songs," Spitzer said in papers filed in state Supreme Court along with the settlement," according to an Associated Press report Thursday. "UMG has obtained airplay for its songs through such deceptive and illegal practices as bribing radio station employees, on occasion, to play UMG songs, providing a stream of financial benefits to radio stations, to assist with stations’ overhead costs or to provide promotional support, on condition that UMG records receive airplay," Spitzer stated. UMG was also accused of "engaging in fraudulent call-in campaigns to increase airplay." UMG did not immediately comment on the settlement.

Click here for Brian Ross’ original payola report.

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