The third and largest settlement with majors.
Universal Music Group today (May 11) became the third major label to settle with the state of New York over alleged radio pay-for-play violations, investigated by New York State attorney general Eliot Spitzer.
Under terms of the agreement, UMG will pay a $12 million fine (in the form of a charitable donation to New York State not-for-profit music education and appreciation programs) and agree to a sweeping list of reforms to its radio promotion practices.
Most notably UMG and its labels—Interscope A&M, Geffen, Island Def Jam, Universal Motown Recordings Group, Uni-South, Universal Nashville and Verve Music Group—have agreed to stop making payments and providing expensive gifts to radio stations and their employees in return for airplay of particular artists’ songs.
UMG used such tactics to secure airplay for Nick Lachey, Ashlee Simpson, Brian McKnight, Big Tymers, Lindsay Lohan and others.
Spitzer’s investigation determined that UMG bribed radio station programmers with electronics, vacations, airfare, hotel accommodations and tickets to sporting events and concerts; picked up the tab for radio operational expenses and contest giveaways; participated in advertising based pay-for-play spin buy programs; and used independent promoters—including Jeff McClusky, Bishop, Bait & Tackle and Michele Clark—to funnel illegal payments to radio stations.
Among the egregious violations cited in the Spitzer probe: Universal Motown spent close to $300,000 in July 2003 to drive airplay of Lumidee’s “Dream”; and the program director at WBEE (Rochester, NY) asked Uni-South to pay for a $2,500 laptop computer for the station in exchange for the station adding two songs, one by Joe Nichols and the other by McHayes.
As part of its reform efforts outlined in the settlement, UMG will halt payments and other inducements to radio stations for airplay; hire of a compliance officer to monitor promotion practices; and set up an internal policing system to detect future abuses.
The UMG settlement follows similar deals last year with Sony BMG, which agreed to a $10 million settlement in August, and Warner Music Group, which settled for $5 million in November. Sources familiar with the situation say that the sizes of the settlements are based on market share. Spitzer has also filed a lawsuit against Entercom Communications Corp. for pay-for-play abuses.
Probes into the promotion practices of EMI and a number of radio conglomerates—including Clear Channel, Cox, Infinity, and Emmis—are ongoing.
"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,” UMG said in a statement. “The reforms that we have agreed to with the Attorney General are consistent with the policies that we voluntarily implemented over a year ago."