New York State Attorney General Eliot Spitzer announced the second settlement in four months with a major music label in his ongoing pay-for-play probe of that industry.

This time the EmpireState’s top prosecutor worked out a deal with Warner Music Group that forced the company to admit its illegal practices and to discontinue providing radio stations and their employees with financial incentives to play its recordings.

As part of the deal on Tuesday, Warner will pay $50,000 for the state’s legal costs and give $5 million to the Rockefeller Philanthropy Advisors to hand out to nonprofit groups for music education.

Warner Music shares were down $0.03 to $17.58 in recent trading Wednesday.

In July, Sony BMG agreed to a similar settlement and was forced to pay $10 million.

Music Worlds Collide

The Warner deal is an example of the collision of the industry’s “old school” business and its emerging “new wave,” which has kept the industry in a kind of ongoing turmoil.

Just three weeks ago, Warner, which is home to Madonna’s Maverick label, launched Cordless Recordings, a web-based initiative designed to showcase new talent (see Warner Debuts Cordless Music).

Instead of forcing new artists through the complex wringer of traditional CD releases, Cordless will release clusters: sets of three or more songs for download only.

Cordless offers a direct route to the customer that to some extent bypasses the radio. Warner hopes that Cordless will provide a less pressurized environment for new acts. So the company could be developing its own alternative to the practice of handing out cash and gifts to create some buzz around its new acts.

Mr. Spitzer’s settlement with Warner focuses on “a rampant industry practice of record labels offering streams of financial inducements to radio stations and their employees to obtain airplay for the recordings by Warner’s artists.”

Even the traditional radio business is changing as it looks to compete with Internet and satellite radio outlets. Terrestrial radio is stepping up the transition to high-definition (HD) radio, which gives it the ability to link directly with listeners online (see Clear Channel Tunes HD Radio).

The music industry is in flux, but its old-school/new-wave elements will continue to collide as the industry adjusts to a number of disruptive trends that have encircled it in the last year.

“With the Cordless label, the Warner Music Group is experimenting with a new approach to introducing tomorrow’s great artists while offering a home for established musicians who want to make the most of today’s online world,” said Cordless President Jason Fiber.