LONDON/NEW YORK – EMI Group PLC (search), the world's third-largest music company, on Friday said it and other music companies faced a New York probe into how music companies influence what songs are played on the radio.
"We are cooperating fully with this inquiry, which is at a preliminary stage," EMI said in a statement.
New York Attorney General Eliot Spitzer (search), who has already taken on the investment banking, mutual funds and insurance sectors, has served subpoenas against Universal Music Group (search), Sony BMG Music Entertainment (search), EMI and Warner Music (search), sources familiar with the matter said, confirming a report in the New York Times.
A New York Attorney General spokeswoman declined to comment. Warner Music and Sony BMG declined to comment. A spokesman for the Universal Music Group was not immediately reachable.
EMI, the only publicly traded, stand-alone music company among the four majors, closed down three pence at 217p, having earlier hit a low of 208-1/2p.
The investigation, which several sources said was still in the "preliminary" stages and may yet lead to no official charges, started in September.
Spitzer has requested information on the companies' relationships with independent promoters who serve as middlemen between music companies and radio stations, one source familiar with the matter said, confirming reports.
The investigation revisits a decades-old practice of employing middlemen to sidestep U.S. laws restricting the bribing of broadcasters to air particular songs without disclosing this to listeners.
EMI said in the statement it had a strict, long-standing policy against unlawful radio promotion practices.
"EMI has no reason to believe that there will be a material financial impact on the company," it added.
One music industry source said the investigation could be beneficial to the music industry, which shells out hundreds of millions a year to the promoters.
"If the process is changed, where we no longer played that game, it would probably be a benefit to us," said one music industry source regarding the practice.
Clear Channel Communications (CCU), the largest U.S. radio conglomerate with 1,200 stations, in April 2003 said it stopped dealing with independent promoters altogether.
"This seems to be a very small niche part of the market," said Investec analyst Kingsley Wilson earlier on Friday.
Spitzer has targeted the music industry before, securing $50 million in unpaid royalties to thousands of artists such as David Bowie and Dolly Parton in May.