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Spitzer goes after the Music Industry

Posted By Barry Ritholtz On October 22, 2004 @ 6:32 am In Finance,Music | Comments Disabled


It must be my birthday or something: First Wal-Mart pushes for $10 CDs [1], and then Eliot Spitzer takes on our favorite industries: Music labels and Radio!

Eliot Spitzer is casting his eyes on the music industry, particularly its practices for influencing what songs are heard on the public airwaves.

According to several people involved, investigators in Mr. Spitzer’s office have served subpoenas on the four major record corporations – the Universal Music Group, Sony BMG Music Entertainment, the EMI Group and the Warner Music Group – seeking copies of contracts, billing records and other information detailing their ties to independent middlemen who pitch new songs to radio programmers in New York State.

The inquiry encompasses all the major radio formats and is not aiming at any individual record promoter, these people said. Mr. Spitzer and representatives for the record companies declined to comment.

We have known for quote some time that the industry is a disaster and that radio sucks. Why haven’t the music labels figured out there is a correlation between these two factors?

The quasi-payola arrangement is a fairly complicated scheme. Here’s the NY Times [2] breakdown of it:

The major record labels have paid middlemen for decades, though the practice has long been derided as a way to skirt a federal statute – known as the payola law - outlawing bribes to radio broadcasters.

Broadcasters are prohibited from taking cash or anything of value in exchange for playing a specific song, unless they disclose the transaction to listeners. But in a practice that is common in the industry, independent promoters pay radio stations annual fees – often exceeding $100,000 – not, they say, to play specific songs, but to obtain advance copies of the stations’ playlists. The promoters then bill record labels for each new song that is played; the total tab costs the record industry tens of millions of dollars each year.

The new scrutiny comes at an inconvenient time for the major record companies, which have been pressing federal and state law enforcement officials to shut pirate CD manufacturers and the unimpeded flow of copyrighted music online.

I don’t care what this guy’s political goals are — I am now firmly a supporter. Want a check? Someone to make phone calls? Don’t matter — you got my vote!

$10 CDs, and Spitzer after the labels & radio: Happy Birthday to me!

Record Labels Said to Be Next on Spitzer List for Scrutiny [2]
By Jeff Leeds
October 22, 2004


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URL to article: http://www.ritholtz.com/blog/2004/10/spitzer-goes-after-the-music-industry/

URLs in this post:

[1] $10 CDs: http://bigpicture.typepad.com/comments/2004/10/walmart_wants_1.html

[2] NY Times: http://www.nytimes.com/2004/10/22/business/22music.html?ex=1256097600&en=baa61a93aa8d7d40&ei=5090&partner=rssuserland

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