Wednesday, July 27, 2005

Payola: Victimless Crime?

Daniel Gross of Slate isn't all that excited about Eliot Spitzer's payola crusade:

Clearly, people working in regulated industries—especially radio, where broadcasters operate under federal licenses—should get nailed when they break the rules. And in radio, pay for product placement without full disclosure is clearly against the rules. But is it wrong? In the half-century since the original payola scandals, the music industry, the broader commercial culture, and consumer expectations have evolved to the point where the payola laws seem outmoded and backward-looking.

It's a truth universally acknowledged that manufacturers of everything from soap to computers pay the folks who control crucial distribution channels to display their wares prominently. It's legal, and no one minds. Viewers have accepted with equanimity the rise of (disclosureless) product placement in television shows and movies. In June, Randy Kennedy wrote an excellent brief dissertation in the New York Times on "co-op advertising," the process by which book publishers effectively pay Barnes & Noble for guaranteed placement at the front of stores. (No disclosure, no hint of illegality.) Why are Doritos bags stacked so nicely at the end of your supermarket aisle? Because Frito-Lay pays for them to be there. And the Web is one gigantic payola machine, from to the exploding realm of paid search.

... Payola is banned in radio because the airwaves are publicly licensed, which makes them subject to government regulation in a way supermarket shelves are not. After the 1950s payola scandals, government decided that radio stations should be as independent as possible from their suppliers (the music industry). The public should be able to count on radio stations to exercise independent critical judgment and to know that the music industry and the stations aren't conspiring to jam lousy bands down their throats while preventing artistically worthy groups from being heard.

...But what exactly do the laws that Spitzer is enforcing accomplish? ...With declining record sales, the rise of Internet and satellite radio, and the advent of iTunes, iPods, and podcasting, radio stations and record companies have become an object of pity more than fear. Indeed, read the correspondence, and you'll find people who aren't particularly good at business (or spelling) exchanging penny-ante favors with equally pathetic DJs in order to get them to play the lame songs they know the market doesn't really want to hear.

... Today, music groups can control distribution and reach global audiences instantly. It's possible—though certainly more difficult—to build a career in music without radio stations or Sony.

Entertainment payola is harmless because this is a consumer market that functions reasonably well. Books and movies backed by huge, ubiquitous promotional budgets won't gain market share and displace competitors if they suck. The Island may have launched in 3,000 theaters, but it won't be filling them for long. We don't need laws to prevent the excessive marketing of The Island. Similarly, we don't need laws to stop labels from paying to put bands on the radio. If no one likes the music, it won't last, and the stations themselves will suffer. As Mel Karmazin, the former head of Infinity Broadcasting and CBS used to note, every radio comes equipped with an on/off switch.
His whole argument strikes me as off-base. It's irrelevant that the rules that Spitzer is enforcing don't affect the listening public's outside of radio because they deal only with radio. And even though radio is in decline, it is still extremely powerful, and the airwaves are still owned by the public. If the record companies didn't think it was worth paying for pay, why would they do it? And if even payola doesn't help all that much, he concedes that the companies should be punished if they break the law, so why should he care that they way they break the law isn't very successful? There is only so much space on the airwaves, so every time a payola song is played, a non-payola song is crowded out. Finally, why does he think radios are falling out of favor? Because the public has been forced to listen to music it doesn't want. Sure they can listen to iPods and satellite radio, but should you have to pay $400 to listen to music you should be able to hear for free?

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