Payola Probe Deepens
The Department of Justice confirmed it is looking into “possible anticompetitive practices” by the Big Four recording companies.
Details of the investigation are few, but sources characterize it as identical to an investigation by New York Attorney General Eliot Spitzer, who is looking into the wholesale prices that labels charge for music downloads.
Universal Music Group and Warner Music Group have been told by the DoJ to expect a formal demand for information, according to two anonymous sources. Sony BMG and EMI Music either have been or will soon be subpoenaed, sources told the Washington Post.
Labels and online stores such as iTunes are in a battle over “variable pricing,” the article said. Online stores do not want to raise the 99-cents-per-song standard, but labels want to charge more for popular tunes and less for the low-demand songs.
None of the four major labels had a formal response to the investigation.
Spitzer recently filed a lawsuit stemming from his payola investigation of radio stations. The suit targets Entercom Communications Corp., which owns and operates 105 radio stations, including seven in Buffalo, N.Y., and four in Rochester.
“We have moved from the label side, those who put out the records and are forced to pay for air time, and switched to the radio conglomerates … that are extracting money,” Spitzer said.
Gifts, trips and cash were used as leverage to get songs on the air, the attorney general said, adding that the Federal Communications Commission has been “asleep at the switch” and should consider revoking the licenses.
At Rochester’s country station WBEE for example, Spitzer alleges the program director asked the Universal South country label to pay for a $2,500 laptop computer for the station. In return, WBEE would add songs by
“This is a forwarded virtual shopping cart. It includes the desired laptop that we are ordering for WBEE. It runs about $2512.00,” says an e-mail from Universal South promotional rep Lisa Strickland that is included as evidence in Spitzer’s case.
“All looks well for Joe this Monday. Thank you again for being a part of this single so early! And for McHayes,” an e-mail four days later from Strickland to WBEE says. “Have you received your computer yet?”
Spitzer also cites an incident at WBEE where an e-mail announced an agreement for Nichols to visit the station along with an instruction by the music director that “We have to add his song today … .”
A spokesman for
“We have firm policies prohibiting payola and requiring compliance with the federal sponsor identification rules, and we enforce them,” Entercom said in a statement.
Spitzer subpoenaed nine radio companies in February for his payola investigation.
Last year, Warner Music Group and Sony BMG said they would settle with Spitzer, paying $5 million and $10 million respectively to be dropped from the investigation.