UMG Agrees To Record Settlement

Universal Music Group, the world’s largest record company, on May 11th became the third to settle “payola” allegations leveled by New York Attorney General Eliot Spitzer against record companies and radio chains, and in so doing set a new record-high payment of $12 million.

Sony’s music arm has already agreed to pay $10 million to settle with Spitzer, and Warner Music agreed to a $5 million settlement.

Spitzer alleged that UMG provided vacations, electronics and other bribes to increase radio play for its artists including Nick Lachey, Ashlee Simpson, Brian McKnight, Big Tymers, and Lindsay Lohan.

UMG agreed to hand the cash over to charity, along with $100,000 to cover investigation costs, and to adopt particular reforms, Spitzer said. The $12 million payment will be distributed through Rockefeller Philanthropy Advisors to nonprofit groups in New York to fund music education and appreciation programs.

Without admitting guilt, UMG acknowledged “various employees and independent promoters acting on behalf of the company” engaged in illegal practices, Spitzer said.

“UMG has illegally provided radio stations with financial benefits to obtain airplay and boost the chart position of its songs,” Spitzer said in papers filed in state Supreme Court along with the settlement.

“[The company] has obtained airplay for its songs through such deceptive and illegal practices as bribing radio station employees, on occasion, to play UMG songs, providing a stream of financial benefits to radio stations, to assist with stations’ overhead costs or to provide promotional support, on condition that UMG records receive airplay,” the AG said. Universal was also accused of “engaging in fraudulent call-in campaigns to increase airplay.”

Spitzer laid out his case against UMG in the filing. In January 2003, a WFLY-FM program director was provided use of a Miami hotel room for playing “Shoulda, Coulda, Woulda” by Brian McKnight and putting it on the New York station’s playlist, he alleged.

The hotel room was listed as a “contest prize” for accounting purposes. Spitzer included internal UMG e-mails in the filing, including one that shows a station program director asking the company to provide him with a flight to Madrid to see U2 perform last year.

The request required assigning the better seats to the program director and less expensive seats to contest winners, according to the court filing.

“Consumers have a right not to be misled about the way in which the music they hear on the radio is selected,” Spitzer said. “Pay-for-play makes a mockery of claims that only the ‘best’ or ‘most popular’ music is broadcast.”

Spitzer claimed UMG used interns, employees and “outside vendors” to pose as listeners requesting UMG songs. In July 2004, UMG started pushing “Rain on Me” by Ashanti through its Island Def Jam label, paying $3,500 for six weeks. IDJ also allegedly hired another group to drum up airplay for Ludacris‘ “Stand Up” at several radio stations.

Spitzer launched his payola investigation in 2004, alleging wrongdoing by music and radio companies.

Earlier this year, he sued Entercom Communications, accusing its execs of running scams to trade cash for airplay of songs. Entercom has denied the allegations. The Federal Communications Commission is also investigating “pay-for-play” practices among major radio companies.