Record Co. May Settle 'Payola' Charges

07/25/2005 9:34 AM, AP


New York Attorney General Eliot Spitzer is expected to announce today an international "payola" settlement with a major record company to limit the industry's ability to influence what recordings are played on the radio.

The settlement was expected to be announced before noon EDT, according to a scheduling announcement. Media reports worldwide began reporting since Saturday that SONY BMG Music is expected to settle with Spitzer, while three other companies remain under investigation.

Spitzer spokesmen refused to comment.

In October, Spitzer had questioned the London-based EMI Group PLC record label and other companies in the music and broadcast industries about the promotion of their recordings on radio stations. EMI had confirmed the inquiry.

The Los Angeles Times on Saturday quoted unidentified sources saying SONY BMG could pay as much as $10 million to settle the case.

A SONY spokesman didn't immediately respond to a request for comment.

Spitzer had requested documents and information from EMI, Warner Music Group, Vivendi Universal SA's Universal Music Group, Sony Corp (NYSE:SNE - news). and Bertelsmann AG's Sony BMG Music Entertainment.

The industry uses independent promoters or "indies." They are paid by record companies to persuade radio stations to play the companies' recordings.

The 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. Rock-and-roll pioneer Alan Freed and Dick Clark, host of "American Bandstand," were among those who testified to Congress, and the investigation cost the careers of several top disc jockeys of the era.