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July 23, 2005
Spitzer fights payola with a little payola
My two teenage daughters and their friends just laugh at me whenever I observe to them that most of the noise that they listen to on the radio is so bad that the only way the "music" could ever make the airwaves is through bribery.
Well, my view was vindicated today as this NY Times article reports that New York Aspiring Governor Eliot Spitzer will announce a settlement that will involve at least a $10 million fine with Sony BMG Music Entertainment as part of an 11-month investigation into how music companies get radio stations to play songs. As is typical in such investigations these days, the big four global music companies -- Sony BMG, Vivendi Universal SA's Universal Music Group, EMI Group PLC, and Warner Music Group Corp. -- have apparently been cooperating with Mr. Spitzer's investigation out of fear of a criminal indictment that would be potentially devastating to the companies' U.S. business.
The investigation apparently relates to the companies' use of so-called "independent promoters," who are brokers who are paid to plug new songs to radio stations. The practice is similar to payola -- direct payment in exchange for airplay of specific songs -- which has been illegal under federal law since the payola scandals of the 1950s. Inasmuch as the line is often a tad fuzzy between merely persuading a radio station executive to play noise and offering the executive a quid pro quo for doing so, representatives of Mr. Spitzer and Sony BMG have apparently been haggling over mutually acceptable guidelines for future conduct between the music company and radio stations.
Although I am usually wary of government attempts to criminalize these types of business transactions, I could make an exception in this case if the settlement contains a prohibition against playing the noise of this "artist." Despite such social benefits, Larry Ribstein notes that there are strong economic arguments in favor of payola and that the governmental prohibition against it only made the market less transparent.
Posted by Tom at July 23, 2005 07:14 AM
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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 [Read More]
Tracked on July 23, 2005 09:48 AM
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