Tom Kirkendall discusses this NYT report that Eliot Spitzer is hot on the trail of a payola scandal – both conventional payola (paying stations to play songs) and spot buys, through which stations buy time to play songs which then artificially boost the popularity of the song. As I have discussed, there is solid economic theory (e.g., Ronald Coase) defending payola, and reason to believe that regulation of payola just forced the practice underground into spot buys, which made the market even less transparent.
As usual, Spitzer is bludgeoning the companies into a settlement that would avoid a trial involving some tricky proof issues (which of the payments were bribes?) as well as issues regarding the legality of spot buys. Of course the real motivation is Spitzer’s campaign for governor.
Update: Randy Picker points out that opening up the airwaves is the ultimate answer to payola. That’s exactly what XM and Sirius are trying to do. But of course the land-based radio stations don’t like this. Instead of solving the problem through competition we're likely to continue to not solve the problem by restricting competition.
By the way, I’ve been using XM for a month out at our Virginia house, which doesn’t get decent broadcast reception, and so far I like it enough to see what the earth broadcasters are worried about.
Payola is a sin if it is paid to the employee without disclosure to and approval by the employer. Otherwise, its just promotional money. Its like food manufacturers paying for shelf space in grocery Stores.
Posted by: Robert Schwartz | July 24, 2005 at 10:02 PM
Wow, not JLO's record. Well with all that talent no one would have thought she needed help. I also think they could have done without the voice altering effects...but that's just me. Keep it up skank!
Posted by: Amanda James | July 26, 2005 at 04:38 PM