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Clip: Universal payola case settlement

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  • Carl Z.
    Universal Music Settles Big Payola Case By JEFF LEEDS Published: May 12, 2006 The Universal Music
    Message 1 of 1 , May 12, 2006

      Universal Music Settles Big Payola Case

      Published: May 12, 2006

      The Universal Music Group, the world's biggest music company, has
      agreed to pay $12 million to settle accusations that executives paid
      radio programmers to play songs, according to a settlement announced
      yesterday. It is the largest settlement yet in an investigation by the
      New York attorney general that has shaken the music business.
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      Kevin Winter/Getty Images

      Universal gave Yankees tickets to get Brian McKnight on the radio.

      The office of the attorney general, Eliot Spitzer, said in documents
      released yesterday that Universal, a unit of Vivendi, had used a broad
      array of illegal "pay for play" tactics to secure airplay for its
      music, including bribing programmers with laptop computers, tickets to
      sporting events and luxury hotel stays.

      Mr. Spitzer's office has been examining whether the four corporations
      that dominate the music industry have violated federal or New York
      state laws that prohibit payments of cash or anything of value to
      radio programmers for airplay unless the transaction is disclosed to

      Last year, the authorities settled with Warner Music Group for $5
      million and Sony BMG Music Entertainment for $10 million in similar
      arrangements. In March, Mr. Spitzer sued one of the nation's biggest
      radio broadcasters, Entercom Communications, accusing it of trading
      airplay for money, after settlement discussions faltered.

      In an interview, Mr. Spitzer said the "uniformity" of record
      executives' conduct, reflected in e-mail messages and other documents
      uncovered in earlier settlements, "speaks to the understanding in the
      industry that radio play is the best way to motivate sales, and folks
      would do what needed to be done to get the airtime."

      Mr. Spitzer's office is still investigating the smallest of the four
      record corporations, the EMI Group, as well as several radio
      companies, including Clear Channel Communications and CBS Radio
      (formerly Infinity Broadcasting.). The Federal Communications
      Commission has also requested documents from the radio companies as
      part of a separate inquiry.

      Universal said in a statement that it had been working "cooperatively"
      with Mr. Spitzer's office and was "pleased to have completed the
      process with this agreement." Universal said the reforms it agreed to
      are "consistent with" policies it instituted more than a year ago.

      As part of the accord, the company agreed to discontinue certain
      practices — including providing cash for radio contests, and using
      middlemen known as independent promoters to funnel money to stations.

      Settlement documents released yesterday offer examples of how
      executives at the company's various labels — Interscope Records,
      Island Def Jam Music Group, Universal/Motown Records and Universal
      South — offered enticements or used other tactics to gain airplay for
      their artists' songs. In some cases, the documents say, Universal
      tried to disguise payoffs to programmers as gifts to radio contest

      The documents say Universal twice paid for hotel accommodations in
      Miami for Donnie Michaels, then the program director of WFLY-FM in
      Albany, in exchange for his addition of songs by Brian McKnight and
      Nick Lachey to his station's playlist. In April 2004, Universal
      provided Mr. Michaels — by then a programmer at WHYI-FM in Miami —
      with a New York hotel room and New York Yankees tickets. The company
      booked the room under a false name and used a false Social Security
      number to conceal the transaction, the document states.

      In testimony for the attorney general's office, Universal executives
      admitted providing hotel rooms, tickets to sports events and concerts
      to radio programmers for their personal use. Universal also paid for
      radio stations' operating expenses — like a bill for Web site
      maintenance — to obtain airplay for acts like the rap duo Big Tymers,
      Lindsay Lohan and the late hip-hop performer Aaliyah, according to the
      settlement papers.

      At the same time Universal wooed programmers with gifts to add songs,
      the documents say, it also tried to deceive certain stations'
      personnel into believing a new song was deserving of more airplay.

      Executives at the company sometimes tried to inflate the performance
      of a song on the charts monitored by radio programmers by openly
      buying airtime on certain stations. And the company hired outside
      consultants to manipulate call-in request lines.

      In one e-mail message released by Mr. Spitzer's office, a Universal
      executive asked an outside company to place "curiosity calls,"
      inquiring about a new Ludacris single, to dozens of stations. "Calls
      should be 75 percent female, 25 percent male 18-24 years old," the
      e-mail said.

      Even with yesterday's settlement, Universal still faces accusations of
      misconduct in the promotion department at its New York-based Universal
      Records label.

      In a lawsuit filed in Los Angeles Superior Court last year, two
      independent promoters accused Universal of instructing them to submit
      false bills so that overdue payments to the promoters could be
      processed. As a result, the lawsuit claims, expenses were charged to
      certain Universal acts, like the rapper Nelly and the singer Paulina
      Rubio, when the promoters had been pushing songs for Lil' Romeo and
      Big Tymers.

      The lawsuit also contends that Universal executives pressed certain
      radio stations to sever their relationships with the promoters —
      including National Music Marketing — and instead work with others,
      including the husband of an executive who was then Universal's top
      radio promotion official. Universal has denied the accusations.
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