HITS Daily Double


Payola Probe the Latest Focus of Crusading NY Attorney General Eliot Spitzer
The Big Four major record companies—Sony BMG, Universal Music Group, Warner Music Group and EMI—have been served with subpoenas from New York Attorney General Eliot Spitzer’s office. The subpoenas are for contracts, billing records and any other information related to a two-month-old investigation of record-label ties to independent promoters.

According to reports, Spitzer is investigating independent promotion across all radio formats and is not focusing on any one promoter, but is looking into how indies may illegally secure airplay for the labels who hire them.

Investigators “are not going to find anything. They’re 20 years too late,” one promoter told the New York Times, which first reported the story late yesterday on its Web site.

In a press release, EMI acknowledged today that it had received a request from Spitzer for information about how the company promotes records to New York radio stations, and said it is cooperating fully with the investigation. EMI further pointed out that is has a long-standing written policy prohibiting unlawful radio promotion practices—a policy that was internally reaffirmed earlier this year. EMI also says it has no reason to believe the current investigation will have any financial impact on the company.

The other majors have not commented publicly on the subpoenas.

Following deregulation of the radio industry in 1996, big radio chains including Clear Channel began centralizing their associations with indie promoters, striking deals with big indie companies, which paid millions for exclusive access to pitch records to programmers and for advance notice of playlist adds. These promoters billed the labels increasingly high amounts for songs added to their radio clients’ playlists, despite label complaints that the promoters had little impact on the playlists.

In 2002, the RIAA actually asked Congress to strengthen the payola law and investigate independent promotion—a move many found ironic, given that the labels had begun the practice of using indies to skirt the payola law in the first place. But the balance of power had shifted to the giant radio chains and the big “toll booth” indies who made high-dollar deals with them, and the labels were feeling the squeeze.

Both Cox Radio and later Clear Channel subsequently said they would not renew their contracts with independent promoters, wishing to avoid even the appearance of engaging in a pay-for-play arrangement. But despite the severing of formal ties, radio stations are known to continue to do business with indies, and labels continue to hire them, though less frequently and for much less money, thanks to the dismal state of the record business.

This is not the first time that New York Attorney General Spitzer, who has recently been in the news for investigations of Wall Street and insurance companies, has taken on the music business. He previously led and won the fight to do away with Minimum Advertised Price (MAP) policies at the labels, and last year pressured the labels to agree to his plan for distributing uncollected artist royalties.