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Monday, July 25, 2005

Sony Settlement and Eliot Spitzer

Now the good chefs at Room Service do not roll like this…

Sucks for some of y’all though



Sony BMG to Pay $10 Million to Settle Payola Probe

Sony BMG Music Entertainment, the nation's second-largest music company, agreed today to pay $10 million to settle a payola investigation launched by New York Atty. Gen. Eliot Spitzer.

The company, one of four that Spitzer subpoenaed last fall as part of his inquiry into the music business, also agreed to stop making the illegal payments and providing expensive gifts to radio stations in return for playing the company's songs.

A review of company e-mails by investigators found that Sony employees offered "outright bribes" to radio programmers in the form of vacation packages, electronics and other gifts, Spitzer's office said in a statement. In some cases, the illegal gifts were described by company officials as contest giveaways for radio listeners.

Sony also used independent promoters to channel illegal payments to radio stations or disguised the funds as payments for advertising, investigators alleged.

"Our investigation shows that, contrary to listener expectations that songs are selected for airplay based on artistic merit and popularity, airtime is often determined by undisclosed payoffs to radio stations and their employees," Spitzer said in a statement. "This agreement is a model for breaking the pervasive influence of bribes in the industry."

The settlement with Sony BMG, details of which were reported by The Times on Saturday, could spur other music corporations to agree to similar deals with Spitzer's office.

In September, investigators subpoenaed executives at Universal Music Group, Warner Music Group and EMI Group as well as Sony BMG. Investigators requested 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.

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 reviewing corporate e-mails, New York investigators encountered numerous instances of Sony BMG employees discussing the illegal payments. In discussing a payment given to a radio programmer in Buffalo, one promotion executive at Sony BMG's Epic Records wrote to a colleague at Epic:

"Two weeks ago, it cost us over $4,000.00 to get Franz [Ferdinand] on WKSE. That is what the four trips to Miami and hotel cost . . . At the end of the day, [David] Universal added GC [Good Charlotte] and Gretchen Wilson and hit Alex up for another grand and they settled for $750.00. So almost $5,000.00 in two weeks for overnight airplay. He told me that Tommy really wanted him to do it so he cut the deal."

Another Epic employee who was trying to promote the group Audioslave to a Clear Channel network programmer asked in an e-mail:

"WHAT DO I HAVE TO DO TO GET AUDIOSLAVE ON WKSS THIS WEEK?!!? Whatever you can dream up, I can make it happen."

As part of the settlement, Sony BMG, in an industry first, will hire a compliance officer to monitor promotion practices and create an internal accounting system to detect abuses.

The record company, in a statement, said that payola has "continued to be an unfortunately prevalent aspect of radio" despite federal and state laws prohibiting the practice.

"Sony BMG acknowledges that various employees pursued some radio promotion practices on behalf of the company that were wrong and improper, and apologizes for such conduct," the company said. "Sony BMG looks forward to defining a new, higher standard in radio promotion."

The company will make a $10 million payment to the Rockefeller Philanthropy Advisors that will be distributed to New York state not-for-profit entities involved in music education and appreciation.


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