Warner Agrees to Settlement in Payola Investigation

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New York State Attorney General Eliot Spitzer announces a second settlement in his office's ongoing probe of music industry payola, or the exchange of gifts for radio airplay. Sony BMG agreed to a $10 million fine in July, and now Warner Music Group will pay $5 million.

STEVE INSKEEP, host:

New York state's attorney general, Eliot Spitzer, has reached another settlement while investigating payola. That's when record companies exchange gifts for air play on radio stations. Sony BMG was the first company to settle for millions of dollars. Yesterday, Spitzer settled with Warner Music Group, as NPR's Neda Ulaby reports.

NEDA ULABY reporting:

Payola is a dirty word, so it's rarely used by people at record companies and radio stations. The preferred euphemism: promotion support. So if I am a promotions person at a record company and you're an unethical radio station programmer, I might offer to support you for promoting a song by one of my artists. I might offer you trips for on-air prizes or I might offer you personally a laptop computer. Terryl Brown Clemons is New York's assistant deputy attorney general. She says the gifts were sometimes mundane: a Home Depot gift card or station maintenance.

Ms. TERRYL BROWN CLEMONS (New York's Assistant Deputy Attorney General): Let's say, for example, they needed to have a van repainted. Well, the labels were paying the bill to have that taken care of in order to secure air play for their song.

ULABY: Some New York stations were found to be especially good at getting promotion support.

(Soundbite of radio program)

Unidentified Man: 106.7 KISS-FM.

ULABY: WKGS Rochester, WKKF Albany and WWHT Syracuse all happened to be owned by Clear Channel. But Terryl Brown Clemons says pervasive give-and-take now characterizes the entire music industry.

Ms. CLEMONS: It goes across labels. It goes across radio conglomerates.

Mr. JONATHAN ADELSTEIN (Federal Communications Commissioner): This is potentially the most systematic and widespread abuse of FCC rules in the history of American broadcasting.

ULABY: Federal Communications Commissioner Jonathan Adelstein is not just talking about Warner Music Group. After the Sony BMG settlement this summer, Adelstein helped launch the commission's investigation into payola. He says broadcasters are serving the music industry at the expense of their listeners.

Mr. ADELSTEIN: So the public has no idea that the reason this material's on the air is not because it's the best the radio station could find, but because whoever is promoting it had the biggest ad budget.

ULABY: No one from Warner Music Group was willing to comment, but a written statement said the company initiated internal reforms earlier this year. The New York State Attorney General's Office says the investigation continues with the remaining two major labels headed for possible settlements as well. Neda Ulaby, NPR News.

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