Legalize 'pay for play'
By Dimitri Vassilaros
Sunday, August 7, 2005
To fully appreciate how condescending and controlling government can be as it supposedly protects the consumer -- and government's utter contempt for the free market -- just look to your radio. And to Section 317 of the Communications Act prohibiting the victimless crime of payola -- broadcasters failing to air proper sponsorship identification.
Morph "pay" and "Victrola" and you get "payola," a catch-all word that usually refers to a station or its employee accepting money or other goodies from record companies in exchange for airing that company's music but not telling the listener about the payment.
New York Attorney General Eliot Spitzer bagged a trophy company last month with his announcement that Sony BMG Music Entertainment agreed to fork over $10 million and to stop paying stations to feature its music product.
Mr. Spitzer's investigation of suspected "pay for play" practices in the music industry is not limited to Sony. He also is investigating EMI, Warner Music Group, Vivendi Universal SA's Universal Music Group and others.
"This agreement is a model for breaking the pervasive influence of bribes in the industry," Spitzer said
Well, the law is the law and he has every right to investigate potential violations. But should this law be the law?
Why would a listener care if a station was paid to air a song?
"That is a free market point of view," said Tom Taylor, editor of the trade publication Inside Radio. "If people think the song stinks, they will not listen. And if people do not like how a grocery store stocks product, they will not shop."
The Federal Trade Commission estimates food companies hoping to highlight their products spend about $9 billion annually for "slotting" -- buying the most desirable shelf space. That ersatz payola is kept from the customer. What's the harm?
Stations live and die by their audience ratings, not by what they could get from payola, according to Robert Unmacht, who heads iN3 Partners, a media consulting firm based in Nashville. Mr. Unmacht said that even if he had a dog that yodels and he started pulling out hundred-dollar bills from his wallet while asking a station how much it would cost to air the canine yodeling, it would not be on the radio.
"The value of a station is in the license and its income flow," according to Clifford M. Harrington, chair of the communications law division and partner of the international law firm of Pillsbury Winthrop Shaw Pittman LLP. Stations can make much more selling their own ads instead of getting payments to play songs being hyped by the record labels. "It would be crazy to blow off your audience," Mr. Harrington said.
Just because a customer sees a CD or DVD display in a store (presumably highlighted because the store received "payola" to feature it), he does not automatically think that's a good CD, said former Federal Communications Commission attorney John F. Garziglia of Womble Carlyle Sandridge & Rice PLLC. "The consumer is smarter than that."
Consumers will reward good business decisions by listening to those stations -- and tuning out those making bad ones. Is government intervention really needed for a free market that corrects itself the instant a listener touches a button?
Think about that the next time you tune out a radio station or reach for a box of your favorite cereal.
Dimitri Vassilaros can be reached at email@example.com or (412) 380-5637.