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Published:July 28th, 2006 12:33 EST
Record Companies Paying Big Time For Payola Scandal

Record Companies Paying Big Time For Payola Scandal

By Maria Grella

The payola scandal has really made record companies pay big time. The four major record labels, EMI Music North America, Sony, Warner Music and Universal Music Group, were forced to fork over huge monetary awards.  This came as a result of charges that they were providing financial and other incentives to radio stations as bribes to keep playing certain artists in their music rotations.  All four music companies settled, paying millions of dollars in damages.

In a statement, New York Attorney General Eliot Spitzer said that EMI had offered "financial benefits" to radio stations as a pay-for-play tactic to boost the song's rotation and chart position of their artists. He further commented that this practice not only altered the public's perception of bands and artists in the music industry, but broke the law. "When a record label engages in an elaborate scheme to purchase air time for its artists, it violates state and federal law and presents consumers with a skewed picture of the country's proclaimed 'best' and 'most popular' music."

Examples of unethical behavior were released in Spitzer's documents. In 2002, an executive from EMI extended a general manager of a Long Island radio station, free tickets to a Rolling Stones concert as an incentive for playing a Baha Men song at least 3 times daily.


Another revelation was by an email sent by a program director to a Virgin promotion manager, seeking Toronto area Rolling Stones tickets for personal use, where he was willing to do "what it takes to get them." The p.d. admitted that in trade for the tickets, the label got airplay for both the Rolling Stones and Exies. Another email tells a station to manufacture requests for a new Norah Jones song, while yet another programmer asks a Virgin promoter to be hooked up with a copy of the video game Grand Theft Auto in exchange for airplay.  Some of EMI's unethical artist boosts include the Rolling Stones, Coldplay, Gorillaz and Norah Jones. 

The company released this statement: "EMI is pleased to have resolved these radio promotion matters with the New York State Attorney General with this agreement. In addition to voluntarily adopting strict policies last year, we have been working cooperatively with the attorney general to reinforce these policies."

However, EMI didn't take full responsibility; instead the company placed the blame on several employees who had taken promotional activities to the inappropriate level. EMI has also agreed to reform its company. In addition to immediately ceasing pay-for-play, a compliance officer will be hired to supervise promotions and a new system will be created to detect future abuses.

EMI, the third largest record label in the world, and parent company of Virgin Records America, Capitol Records, EMI Christian Music Group and S-Curve Records, shelled out the lowest amount of the four big-wigs, paying $3.75 million to a music-based charity.  

Warner Music Group settled for $5 million, for showering radio station employees with laptops, iPods, and Super Bowl tickets, among other presents, in order to have them play music from their artists.  Green Day, My Chemical Romance and R.E.M. were some of the ones who benefited from this practice.  

In a statement, Warner Music said, "From our perspective, radio cannot be too consumer-driven. The music that people hear on the radio always should represent the highest quality the industry has to offer."

The incriminating evidence Spitzer uncovered against the company included a staffer's email describing a radio director in Cincinnati as "a whore" willing to sell airplay for gifts, and the discovery that a programmer from Buffalo had received airfare to Miami and given a computer, aw well as tickets to up the spins of Warner Music artists.  Warner Music also purchased advertising on the Carson Daly and Ryan Seacrest's syndicated countdown shows on Clear Channel stations in exchange for more airplay.

Sony BMG, the second largest record company which includes Arista, Columbia and Epic, has paid $10 million to the state of New York, which will give to nonprofit music education programs. Artists like Jennifer Lopez had continued to get exposure to the airwaves, despite lagging record sales. In a memo, a Sony radio promotions executive wrote, "Please be advised that in this week's Jennifer Lopez Top 40 Spin Increase of 236 we bought 63 spins at a cost of $3,600." Another musical group benefiting was the band Audioslave. In another memo, an executive writes, "what do I have to do to get Audioslave on WKSS this week? Whatever you can dream up, I can make it happen." 

Like EMI, Sony BMG stated that the guilty parties were rogue employees who had engaged in improper wrong doings and the company looks forward to "defining a new, higher standard in radio promotion".

Universal Music Group, the world's largest record company, rolled out the largest sum at $12 million due to allegations. Airtime was ensured for Nick Lachey, Ashlee Simpson, Lindsay Lohan and Brian McKnight.

The money will be given to the Rockefeller Philanthropy Advisors, who will distribute the funds to various New York nonprofit organizations. $100,000 was also paid to promote reforms in the music industry and to cover investigation costs. Following suit, Universal also ducked responsibility, pinning the guilt on employees and independent promoters. The label has agreed to stop illegal bribes, cease the hiring of the faulty independent promoters, and bring on board a compliance officer to regulate promotional campaigns.

Universal Music Group, which consists of Island Def Jam, Interscope, Universal Motown Recording and Verve Music Group, among others, said in a statement, "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. The reforms that we have agreed to with the attorney general are consistent with the policies that we voluntarily implemented over a year ago."

"Consumers have a right not to be misled about the way in which the music they hear on the radio is selected. Pay-for-play makes a mockery of claims that only the 'best' or 'most popular' music is broadcast," said Spitzer.

"UMG has illegally provided radio stations with financial benefits to obtain airplay and boost the chart position of its songs. 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. NY's Attorney General also accused UMG of using interns and other employees to run fake call in campaigns to increase the number of times a song gets played at radio stations.

Examples of underhanded tactics include an incident in 2003 and 2004, where UMG put up a WFLY-FM program director in a Miami hotel in exchange for adding "Shoulda, Coulda, Woulda" by Brian McKnight. The p.d. also received Yankees tickets for playing Nick Lachey. In July 2004, Def Jam paid employees $3,500 for a six-week scam to call in stations like WGCI-FM in Chicago and NY's WQHT to boost airplay for Ashanti's "Rain On Me". Island Def Jam also hired people to hype "Stand Up" by Ludacris at stations in the NY area.

When the strict legislation was put forth after the 1950's scandal, pay-for-play was thought to be a thing of the past. Spitzer's investigations have proven otherwise. It is commonplace for record companies to hire independent promotions to secure airplay of their artists. The practice is inevitable for survival in the competitive corporate-owned radio environment, but under federal law implemented in 1960, gifts are prohibited to ensure airplay.

To the dismay of Spitzer's efforts, the FCC has handled things quietly, by negotiating settlements with these large stations. "The radio conglomerates want to settle on the cheap with the Feds and unfortunately the FCC, contrary to good public policy, has not pursued an investigation of the underlying facts," Spitzer said in a Los Angeles Times interview. This results in weakening his efforts in changing regulations within the music industry.

Spitzer, Democratic favorite for this year's election for governor for NY, has attacked the music industry since taking the attorney general's position in 1998. He has become known as a strong defender of artists' rights as well as fair business dealings. His investigations have uncovered much illegal activity between labels and radio stations, leading to prohibiting employees from giving gifts worth more than $150 to radio stations, and also finding misplaced funds of over $50 million in unpaid royalties.  They are to go to artists the labels stiffed, with the rest going to the state.

Overall, the music industry crack down will be deemed a victory for music fans. According to Scott McKenzie, editor of Billboard Radio Monitor, "The new restrictions will foster competition within every facet of the music industry. This will drastically change the way business is done and ultimately steer radio in a positive direction." Scott went on to say that record labels will likely return to more traditional avenues of advertising, a move that will not only solve the payola problem, but help radio stations in the process.