NY TIMES WARNER MUSIC PAYOLA SETTLEMENT

2nd Music Settlement by Spitzer
By JEFF LEEDS

Published: November 23, 2005

A second major record company has reached a settlement with the New
York
attorney general, Eliot Spitzer, to resolve accusations that it made
payoffs to persuade radio programmers to play certain songs, the
attorney general said yesterday.

The $5 million settlement with the Warner Music Group, the nation's
third-biggest record company, was the latest in Mr. Spitzer's widening
investigation, which has exposed payments to radio programmers in
exchange for playing music and routine manipulation of playlist
information.

In July, Sony BMG Music Entertainment reached an agreement with Mr.
Spitzer. The two record companies that have not settled - the Universal
Music Group, a unit of Vivendi Universal, and the EMI Group - remain
under investigation, as do many big radio chains, according to people
involved in the inquiry.

Warner acknowledged yesterday that certain employees had pursued radio
promotion practices that were "wrong or improper," and apologized. In a
separate statement, the company added that "we consider this to have
been a valuable process."

"From our perspective, radio cannot be too consumer-driven. The music
that people hear on the radio always should represent the highest
quality the industry has to offer."

Mr. Spitzer said that Warner executives had obtained play time for
songs
through "deceptive and illegal" practices, including making payoffs in
the form of personal electronics and tickets to the Grammy Awards, the
World Series and the Super Bowl.

Warner executives also tried to land their artists on playlists by
paying for a station's daily operations, Mr. Spitzer said. He cited
examples of the record company's covering the cost of painting a
station
logo on a promotional vehicle, the production of a station "jingle,"
and
the costs of hiring a voiceover talent.

Warner, which counts acts like Green Day and Twista on its artist
roster, also provided an array of "promotional" items for use in
listener contests and giveaways, a practice company executives
described
as "an industry standard."

Indeed, Mr. Spitzer's investigation has shown that it is common for
record executives to link the amount of promotional support provided to
a station to the amount of play time. In February 2004, when Z-100, the
New York pop music powerhouse, requested the record company pay for a
listener trip to Los Angeles or Glasgow as the grand prize in a
contest,
a Warner executive wrote to another: "With the record in power, I feel
we should do one of these for them. Can we approve this?"

Clear Channel Communications, the parent of Z-100 and several other
stations cited by Mr. Spitzer, said in a statement: "We take this issue
very seriously and have zero tolerance for pay for play. Any employees
who violate this policy will be dealt with accordingly. We investigate
any allegation of improper conduct by our employees. This is no
exception."

The company, the nation's biggest radio broadcaster, fired two
programming executives last month after a review by the attorney
general's investigation.

Under the agreement announced yesterday, Warner will pay $5 million, to
be distributed to nonprofit organizations that finance music education
and appreciation. The company will also pay $50,000 to cover the costs
of the inquiry.

Warner also agreed to an array of changes that mirror those set out in
a
deal Mr. Spitzer reached with Sony BMG, which agreed to pay $10
million.
Warner, like Sony BMG, also agreed to end its use of certain
independent
promoters, middlemen who are paid by the company to press programmers
to
add songs. And the company agreed to limits on the efforts its
executives can undertake to market its artists.

Mr. Spitzer said in an interview: "In this case, as in others, the
acceptance and tolerance of paying for airtime is what has surprised
us.
It was routine."

He also criticized the Federal Communications Commission, which he said
had displayed a "disappointing" lack of action in dealing with the
radio
broadcasters under its jurisdiction since the New York inquiry became
public. The agency announced shortly after Mr. Spitzer's first
settlement that it would start its own inquiry.

Despite e-mail messages and other evidence that appear to point to
widespread violations of the federal law, Mr. Spitzer said broadcasters
did not seem worried about the prospect that the F.C.C. could impose
its
toughest penalty, revoking a station's license.

"Because the notion of license revocation is so clearly discounted,
nobody is terribly concerned about the consequences of the F.C.C.'s
involvement," Mr. Spitzer said. "That's too bad, because what's at
stake
here is the airwaves. Why the F.C.C. is not responding is a little
mysterious to me."

One F.C.C. commissioner, Jonathan S. Adelstein, also pressed for deeper
involvement, saying the agency "needs to act on this evidence and
conclude as soon as possible" its own inquiry. Mr. Adelstein said the
practices Mr. Spitzer illuminated appeared to reflect "the most
widespread and systematic abuse of F.C.C. rules in the history of
American broadcasting."

An F.C.C. spokesman declined to comment on the status of the
investigation, but said "three months is not a long period for
investigations."

Matthew Sweeney contributed reporting for this article.