Warner Music Group has become the second major label company to settle with New York attorney general Eliot Spitzer's office in its ongoing payola investigation.

Warner Music Group has become the second major label company to settle with New York attorney general Eliot Spitzer's office in its ongoing payola investigation.

WMG has agreed to abandon the practice of providing radio stations and their employees with financial incentives and promotional items in exchange for airplay of its recordings. The company has also agreed to provide $5 million for distribution to New York State not-for-profits that fund programs aimed at music education and appreciation.

"Warner is the second major player in the music industry to come forward and acknowledge that these practices are wrong," Spitzer said in a statement. "Unfortunately, other companies continue to engage in them. I applaud Warner's decision to halt this conduct, cooperate fully with my office and adopt new business practices."

According to Spitzer's office, the payola took several forms:

o Direct bribes to radio programmers, including airfare, electronics and tickets to premier sporting events and concerts;

o Payments to radio stations to cover operational expenses;

o Radio contest giveaways for listeners, including flyaways, concert tickets, iPods, gift certificates and gift cards;

o Use of independent promoters to act as conduits for illegal payments to radio stations;

o The purchase of "spin programs" to artificially increase the airplay of particular recordings.

WMG artists benefiting from pay-for-play include the Used, Michelle Branch, Toby Lightman, Josh Groban and Antigone Rising, according to the results of Spitzers investigation, which were released in conjunction with the settlment.

The company often passed along perks to radio stations via indie promoters including Michele Clark Promotions, Jeff McClusky and Associates, Tri-State and Lawnman Promotions. Warner Music’s indie buget could be as much as $100,000 a song.

Warner also bought into indie-brokered cash-for-play spin buy programs including SupeRadio’s Open House Party, Citadel’s Airbound and Entercom’s CD Preview and CD Challenge. The programs are designated as advertising but the spins factor into the chart positions of songs. Citadel’s program cost $2,500 per wee, while Entercom’s cost $3,000-$4500 per week.

On the national level, WMG purchased advertising time on syndicated countdown shows hosted by the likes of Carson Daly, Ryan Seacrest and Rick Dees in exchange for a song’s inclusion in the program.

Artist meet-and-greets, autographed items, iPods, gift certificates, posters, t-shirts and CDs were also offered as promotional support in exchange for airplay. Other pay-for-play tactics included painting a station’s logo on its vehicle, paying to upgrade a station's jingle packages, and the hiring of a new voiceover talent.

WMG would use promotional support to drive spins for acts. Spitzer cites the case of Michele Branch in which a WMG executive told the promotion staff "We need to jump spins immediately this morning. No one should be less than 21x per week. [a Warner employee] will send you a list of offenders [radio stations].... Close the holes!!!”

"The reforms we have agreed to with the Attorney General are consistent with the internal reforms that our new management team implemented earlier this year,” WMG said in a prepared statement. “We consider this to have been a valuable process. From our perspective, radio cannot be too consumer-driven."
Spitzer’s efforts are grabbing the attention of the FCC and law makers.

FCC Commissioner Jonathan Adelstein said in statement that the WMG agreement “raises serious concerns” that federal law under the FCC’s jurisdiction has been violated, along with New York state law. “The FCC needs to act on this evidence and conclude as soon as possible the investigation we are now undertaking,” Adelstein said.

Inspired in part by Spitzer’s settlement with Sony BMG, Sen. Russ Feingold, D-Wisc., has introduced legislation that seeks to close the loopholes on payola-like practices.

"Increased consolidation and cross-ownership of concert promoters and venues has amplified payola's potential for limiting creativity, localism and diversity on our airwaves," Feingold said. in a statement. "Just last week, I introduced updated legislation to address payola and unfair competition in the radio and concert industries. The most recent multi-million dollar settlement provides even more evidence that it is time for Congress to have a national debate on how to address these issues."

Artist advocacy groups are hailing the Spitzer investigation and calling for greater policing of the airwaves.

Michael Bracy, director of government relations for the Future of Music Coalition, says the announcement reaffirms the need for Congress and the FCC to take action to “clean up the corruption” surrounding pay-for-play.

Rebecca Greenberg, national director of the Recording Artists' Coalition, says with the combination of the two label settlements and the introduction of the Feingold radio bill, the music industry may actually be on the verge of real reform.

“RAC hopes Spitzer will continue pushing for settlements with the other major labels, and Congress will seriously address the issue after the Congressional recess," she says.

In July, Spitzer entered into a similar settlement for $10 million with Sony BMG.

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