• NY AG Spitzer Investigates Music Promotion Practices
  • April 20, 2005
  • Law Firm: Reed Smith LLP - Pittsburgh Office
  • Warner Music Group confirmed recently that it has been served with additional subpoenas in an ongoing investigation into music industry promotion practices by New York Attorney General Eliot Spitzer.

    Others to have received document requests reportedly include EMI Group PLC, Vivendi Universal SA's Music Group, Sony Corp. and Bertelsmann AG's Sony BMG Music Entertainment.

    Mr. Spitzer's investigation focuses on independent promoters, which music companies pay to help secure better airplay for new releases. Independent promoters pay radio stations an annual fee -- ostensibly for advance copies of play lists rather than compensation for paying particular songs.

    Federal "payola" laws prohibit broadcasters from taking undisclosed compensation for playing songs on their stations.

    Mr. Spitzer reportedly has said the use of independent promoters places artists who cannot afford such services at a disadvantage. He has asked the music companies for contracts, invoices and other documents in an attempt to examine how songs make it onto radio station play lists.

    Warner stated that it is too soon to predict the outcome of the investigation but said the inquiry has the potential to change the way the recorded music industry promotes its records. The company made these disclosures in a filing with the Securities and Exchange Commission, in preparation for its planned initial public offering this year. Warner anticipates listing its stock on the New York Stock Exchange.

    EMI, another company which has publicly confirmed it is cooperating with the investigation, stated it has a policy banning unlawful promotion practices and has no reason to believe there will be a material financial impact on the company.

    However, mere word of Mr. Spitzer's foray into the music world led to shares from companies involved falling in New York, London and Paris. The investigation into music promotion practices follows industry wide investigations by Mr. Spitzer into investment banking, mutual funds and insurance.

    Why This Matters: Mr. Spitzer, who has been dubbed by the media the "Sheriff of Wall Street" and "The Enforcer," has succeeded in obtaining major operational changes in other industries. If he succeeds in his efforts with the music industry, music companies may have to alter how they promote new music.