One of the biggest music companies, Sony BMG Music Entertainment, agreed Monday to pay $10 million and to stop paying radio station employees to feature its artists to settle an investigation by New York Attorney General Eliot Spitzer.
The agreement resulted from Spitzer's investigation of suspected "pay for play" practices in the music industry.
Sony spokesman John McKay said the practice was "wrong and improper."
"Despite federal and state laws prohibiting unacknowledged payment by records labels to radio stations for airing of music, such direct and indirect forms of what has been described generically as "payola" for spins has continued to be an unfortunately prevalent aspect of radio promotion," he said. "SONY BMG acknowledges that various employees pursued some radio promotion practices on behalf off the company that were wrong and improper, and apologizes for such conduct. SONY BMG looks forward to defining a new, higher standard in radio promotion."
Spitzer said Sony BMG has also agreed to hire a compliance officer to monitor promotion practices.
He commended the company for its cooperation.
"Our investigation shows that, contrary to listener expectations that songs are selected for air play based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees," Spitzer said. "This agreement is a model for breaking the pervasive influence of bribes in the industry."
Spitzer had requested documents and information from EMI, Warner Music Group, Vivendi Universal SA's Universal Music Group as well as from Sony BMG, which is a joint venture of Sony Corp. and Bertelsmann AG.
Spitzer said his investigation showed Sony BMG paid for vacation packages and electronics for radio programmers, paid for contest giveaways for listeners, paid some operational expenses of radio stations and hired middlemen known as independent promoters to provide illegal payments to radio stations to get more airplay for its artists.
Spitzer also said e-mails among company executives showed top officials were aware of the payments.
Spitzer said Sony BMG employees sought to conceal some payments by using fictitious contest winners to document the transactions.
In one case, an employee of Sony's Epic label was trying to promote the group Audioslave to a station and asked: "WHAT DO I HAVE TO DO TO GET AUDIOSLAVE ON WKSS THIS WEEK?!!? Whatever you can dream up, I can make it happen."
In another case, a promoter unhappy that Celine Dion's "I Drove All Night" was being played overnight on some stations threatened to revoke a trip to a Dion show in Las Vegas unless the play times improved.
Sony BMG Music is an umbrella organization for several prominent record labels, including Arista Records, Columbia Records, Sony Music International and So So Def Records.
Star artists signed with the Arista label alone include Aretha Franklin, Whitney Houston, OutKast, Pink and Sarah McLachlan.
The $10 million will be distributed to not-for-profit entities and earmarked for music education programs, Spitzer said.
Spitzer wouldn't comment on the status of similar investigations into other major record companies.
Spitzer "appears to have found a whole arsenal of smokin guns," said Jonathan Adelstein, a member of the Federal Communications Commission, a Democrat. "We need to investigate each particular instance that Spitzer has uncovered to see if it is a violation of federal law. This is a potentially massive scandal."
Record companies can't offer financial incentives under a 1960 federal law that made it a crime punishable by a $10,000 fine and up to a year in prison to offer money or other inducements to give records airplay. The practice was called "payola," a contraction of "pay" and "Victrola" record players.
The law was passed in response to the payola scandals of the 1950s and early 1960s that implicated some then-famous disc jockeys.