Attorney General, Emi Settle Payola Allegations
State Attorney General Spitzer today announced a settlement with EMI Music North America ("EMI") to end its pervasive "pay-for-play" practices in the music industry.
EMI - which includes Virgin Records America, Capitol Records, EMI Christian Music Group and S Curve Records - is one of the four major record companies in America, and its parent, The EMI Group, is the third largest music label in the world.
Spitzer's investigation determined that EMI provided illegal financial benefits to obtain airplay and boost the chart position of its artists by bribing radio station employees with concert tickets, video games, and hotel and airfare expenses; providing a stream of financial inducements to radio stations to assist with overhead costs; using independent promoters as conduits for the illegal payments to radio stations; and engaging in fraudulent call-in campaigns to increase the airplay of particular songs.
The EMI artists who have benefitted from the payola scheme include the Rolling Stones, Coldplay, Norah Jones, and the band Gorillaz.
"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," Spitzer said. "We're pleased that our investigation of payola in the music industry has resulted in significant business practice reforms that will help generate more diverse airplay."
Radio airplay is the single most effective driver of music sales. The more airplay a song receives, the higher it climbs on published charts that purport to reflect the song's popularity, and the more likely consumers are to buy it.
The Attorney General's office obtained emails and sworn testimony from EMI executives who admitted providing radio station programmers with items of value in exchange for airplay. For example, in a September 2004 email, a Virgin promotion manager explained that a radio program director was seeking "Toronto Stones" tickets for himself, and that the director was willing to offer "what it takes for us to get them." When questioned about the email during testimony taken by the OAG, the promotion manager confirmed that the program director from WOTT in Watertown, NY, did indeed receive tickets to a Rolling Stones concert in Toronto for his personal use, and that the label received airplay for Rolling Stones and Exies songs.
Also during the investigation, a Capitol promotion manager testified that the label would pay for production costs if a radio station were putting on a concert, and would pay other radio station bills and expenses, in exchange for airplay. Similarly, a Virgin promotion executive testified that radio stations "might say, 'I'm thinking of adding your' whatever this week. 'Do you think you can take care of lighting for my show, production for my show, or T-shirts' or something like that."
EMI supplemented the work of its promotion employees through independent promoters - third-parties who are paid specifically to deal directly with the radio stations to obtain specified levels of airplay. Although hired by the record labels, some independent promoters employed by EMI - including Jeff McClusky, Bill McGathy and Michele Clark - had exclusive arrangements with particular radio stations.
Under the terms of the settlement, EMI has agreed to undertake company-wide reforms, including the immediate cessation of payments and other inducements to radio stations and their employees in return for "airplay"; discontinuance of independent promoters as a pass-through for securing airplay; hiring of a compliance officer to monitor promotion practices; and implementation of an internal system to detect any future abuses.
EMI will also make a $3.75 million payment, which will be distributed through the Rockefeller Philanthropy Advisors, to New York State not-for-profit entities to fund music education and appreciation programs.
The Attorney General acknowledged EMI's cooperation in resolving the matter.
Spitzer's probe of payola in the music industry previously resulted in three settlements with leading music companies: Sony BMG, Warner and Universal, and a lawsuit against Entercom Communications Corp. The investigation is continuing.
The EMI investigation and settlement were handled by Assistant Attorneys General Charles Smith, Joseph Palozzola and James Yoon, under the direction of Terryl Brown Clemons, Assistant Deputy Attorney General for the Division of Public Advocacy.
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