One of the biggest music companies, Sony BMG Music Entertainment, has agreed to pay $10 million and to stop paying radio station employees to feature its artistes to settle an investigation by New York Attorney General Eliot Spitzer.
The agreement on Monday resulted from Spitzer's investigation of suspected "pay for play" practices in the music industry.
Sony spokesman John McKay said the practice was "wrong and improper".
"Despite federal and state laws prohibiting unacknowledged payment by records labels to radio stations for airing of music, such direct and indirect forms of what has been described generically as "payola" for spins has continued to be an unfortunately prevalent aspect of radio promotion," he said.
"Sony BMG acknowledges that various employees pursued some radio promotion practices on behalf of the company that were wrong and improper, and apologizes for such conduct. Sony BMG looks forward to defining a new, higher standard in radio promotion."
Spitzer said Sony BMG has agreed to hire a compliance officer to monitor promotion practices. He commended the company for its cooperation.
"Our investigation shows that, contrary to listener expectations that songs are selected for air play based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees," Spitzer said.
"This agreement is a model for breaking the pervasive influence of bribes in the industry."
He had requested documents and information from EMI, Warner Music Group, Vivendi Universal SA's Universal Music Group as well as from Sony BMG, which is a joint venture of Sony Corp and Bertelsmann AG.
Spitzer said his investigation showed Sony BMG paid for vacation packages and electronics for radio programmers, paid for contest giveaways for listeners, paid some operational expenses of radio stations and hired middlemen known as independent promoters to provide illegal payments to radio stations to get more airplay for its artistes.
According to Spitzer, e-mails among company executives showed top officials were aware of the payments.
He said Sony BMG employees sought to conceal some payments by using fictitious contest winners to document the transactions.
In one case, an employee of Sony's Epic label was trying to promote the group Audioslave to a station and asked: "What do I have to do to get audioslave on WKSS this week? Whatever you can dream up, I can make it happen."
In another case, a promoter - unhappy that Celine Dion's "I Drove All Night" was being played overnight on some stations -threatened to revoke a trip to a Dion show in Las Vegas unless the play times improved.
Sony BMG Music is an umbrella organization for several prominent record labels, including Arista Records, Columbia Records, Sony Music International and So So Def Records.
Star artistes signed with the Arista label include Aretha Franklin, Whitney Houston, OutKast, Pink and Sarah McLachlan.
The $10 million will be distributed to not-for-profit entities and earmarked for music education programmes, Spitzer said.