ALBANY, N.Y. – Sony BMG Music Entertainment (search) agreed Monday to pay $10 million and to stop paying radio station employees to feature its artists to settle an investigation by New York Attorney General Eliot Spitzer (search).
The agreement resulted from Spitzer's investigation of suspected "pay for play" practices in the music industry.
A Sony BMG spokesman didn't immediately respond to a request for comment.
But Spitzer said Sony BMG has agreed to hire a compliance officer to monitor promotion practices and to issue a statement acknowledging "improper conduct" and pledging higher standards.
He commended the company for its cooperation.
"Our investigation shows that, contrary to listener expectations that songs are selected for air play based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees," Spitzer said. "This agreement is a model for breaking the pervasive influence of bribes in the industry."
Spitzer had requested documents and information from EMI, Warner Music Group, Vivendi Universal SA's Universal Music Group as well as from Sony BMG, which is a joint venture of Sony Corp (SNE) and Bertelsmann AG.
Spitzer said his investigation showed Sony BMG paid for vacation packages and electronics for radio programmers, paid for contest giveaways for listeners, paid some operational expenses of radio stations and hired middlemen known as independent promoters to provide illegal payments to radio stations to get more airplay for its artists.
Spitzer also said e-mails among company executives showed top officials were aware of the payments.
Spitzer said Sony BMG employees sought to conceal some payments by using fictitious contest winners to document the transactions.
In one case, an employee of Sony's Epic label was trying to promote the group Audioslave (search) to a station and asked: "WHAT DO I HAVE TO DO TO GET AUDIOSLAVE ON WKSS THIS WEEK?!!? Whatever you can dream up, I can make it happen."
In another case, a promoter unhappy that Celine Dion's (search) "I Drove All Night" was being played overnight on some stations threatened to revoke a trip to a Dion show in Las Vegas unless the play times improved.
Sony BMG Music is an umbrella organization for several prominent record labels, including Arista Records, Columbia Records, Sony Music International and So So Def Records.
Star artists signed with the Arista label alone include Aretha Franklin, Whitney Houston, OutKast, Pink and Sarah McLachlan.
The $10 million will be distributed to not-for-profit entities and earmarked for music education programs, Spitzer said.
Record companies can't offer financial incentives under a 1960 federal law that made it a crime punishable by a $10,000 fine and up to a year in prison to offer money or other inducements to give records airplay. The practice was called "payola," a contraction of "pay" and "Victrola" record players.
The law was passed in response to the payola scandals of the 1950s and early 1960s that implicated some then-famous disc jockeys.