If I own a hardware store and some guy says to me “put my hammers on display at the FRONT of the store and I’ll give you $100/month” I should be able to do it. It’s my store. If he says “carry ONLY my brand of hammers and I’ll give you $200/month” I think I ought to be able to take that offer too if I want.
So why is it illegal for radio stations to accept money to play certain songs?
My understanding is that payola is legal so long as it is disclosed.
So, why are there any laws relating to payola? I believe the reason stems greatly from the fact that the government has historically taken a more activist and regulatory view to its role as steward of the airwaves. After all, the spectrum used for radio broadcasts cannot be owned by a private individual in the same way that the land that your hammer store occupies. The spectrum is simply licensed to private use, and is subject to a heck of a lot of laws and regulations that don’t readily apply to other ventures. (For example, boobs in a strip club? Uncle Sam doesn’t care. Boobs on cable tv? Uncle Sam currently doesn’t care. Boobs on broadcast TV? Now THAT’S a problem.)
I believe the payola laws stem from a general idea that it was largely certain individuals – popular DJs – were “taking advantage” of their use of the “public’s” airwaves for personal enrichment. I think the general idea is that the public should have a right to know who is profiting from the use of the spectrum for these radio stations, which can be considered a unique type of public trust.
The airwaves belong to the public, and are regulated by the FCC. It is believed to be in the interests of the public to have full disclosure about such things. Note that the FCC doesn’t say that a radio station can’t take money to play songs, just that they have to announce that fact publically.
“Payola” is illegal. “Endorsements” are not. The difference is disclosure.
There are legal means by which some companies can gain exposure in exchange for cash. For retail products for example they can pay retail chains for endcap space where one or more of their products will be prominently displayed. Endcaps are fair game in this case. Similarly companies can provide merchandisers and/or pay for floor/demo space to prominently display their products. Ordinary shelf space, however, is not open to such terms – at least not in Canada. Microsoft could not, for example, pay a retail chain a sum of money to give their products more, or more proimnent shelf space, than a competitor’s similar product, especially if in doing so they reduce the amount of shelf space for their competitors. IANAL but as I recall this falls under anti-competitive laws.
Nintendo was fined some pretty hefty bucks for this back in the late 80s/early 90s for giving game and computer shops payola in exchange for more and more prominent shelf space, even going so far as to pay to have their competition’s products relegated to musty corners or bottom shelves. Since Nintendo was paying for more display space the stores accepting the payola had to cut back on the amount of competing products they carried, thus harming sales of those competing products. Such anti-competitive practises give the one engaging in them an unfair advantage – that of being able to essentially buy their way into a monopoly by making it harder or more inconvenient for consumers to find and purchase competing products, which can drive smaller companies to financial ruin. That’s an unethical way to run a business, and the laws recognize that, which is why it is illegal to engage in it.
The same principle holds true of radio airplay, but replace “products” with “artists” and “companies” with “record labels.”
And here’s a Staff Report on payola:
It’s bribery, pure and simple (so is paying supermarkets). As a society, we are so used to bribery from the top on down, that we excuse it, but ultimately, any bribery is bad for society.
Thank you! Much clearer now.
I don’t see how it’s bribery, any more than any other exchange of service for cash is.
So I went down to the barbershop and bribed the barber to cut my hair, and then I picked up my car from the mechanic, who I bribed to fix it. Then I headed off to work, where my boss bribed me $11/hr to work the rest of the day.
So if your boss is paying you $11/hr to work for him and someone comes in and pays you $2,000 to promote their business while you’re still collecting your $11/hr from your boss, what do you call that?
Ravenman and iamthewalrus have it exactly right. Payment has to be disclosed. That gives the listener the information they need to judge the worth of the endorsement.
If you own the hardware store–that’s the key word. The deejays taking payola didn’t own their radio stations. If you work at or even manage a hardware store and take money to improve the display, you’re in breach of your fiduciary duty to the store’s owners (shareholders if it’s publicly traded) and you’re in trouble with both the owners and the government.
You may think so, but the people who wrote antitrust laws didn’t agree. Paying retailers not to carry others’ products is often an antitrust violation.
Aren’t exclusive deals legal in America? Over here, for example, fast food chains have exclusive deals to sell only one brand of cola, and not the competing brand. Is that illegal over there?
Really? Drug manufacturers set up kickbacks all the time. I buy flea product X and at the end of the year they hand me a check for x% of what I’ve bought. The check is made out to me (my business is a sole prop.). That’s illegal? If so, fine.
No, it would be illegal if part of the deal was that you agreed not to buy & sell any of their competitors flea product. That’s illegal restraint of trade.
All they are doing is giving you a rebate at the end of the year, based on your purchases during the year. In effect, a volume discount. Nothing to do with the competitors products.
It’s quite possible for a store to collect such checks from several of the manufacturers at the same time – grocery stores do it all the time. You just have to have enough sales volume in the store to sell enough of both manufacturers products to get your percentage.
t^ I understand what you are saying. Effectively, however, the deal is set up in such a way as to make it desirable for me to maximize the rebate by only carrying one brand. The manufacturer knows how much a business the size of mine will sell. They then create sales levels that will only be reached by buying only their product.
Not that I have a problem with it, by any means.
Yes, certainly the manufacturer will structure the deal to capture as much of your business as possible. But as long as they do it by incentives or discounts to you, without any specific agreement that prohibits you from buying from their competitor, it stays within legal bounds.
IBM used to (maybe still does) do something similar with their big computer customers. At the end of the year, they offered an incentive payment (or credit on future purchases) based on the total dollar amount the customer had purchased from IBM in that year, including mainframes & other hardware, software licenses, consulting services, and IBM PCs and laptops. So you would often see big companies buying IBM PCs, even though they could have bought similar ones from somebody like HP or Dell for a few hundred dollars less each. By adding the PCs cost into what they were paying for other IBM services, they jumped into a higher percentage payback on that IBM incentive, so it was worth paying more for individual PCs.
There’s a difference between selling cola at a private business and playing music on a terrestrial radio station. If I don’t like Coke, I can go to a restaurant that serves Pepsi. If I don’t like Britney Spears, my choices in radio may be much more limited.
What’s being overlooked in this discussion is that, in the US anyway, terrestrial radio stations are licensed to broadcast “in the public interest”. The Federal Communications Commission, in its infinite wisdom, has decided that accepting things of value in exchange for airplay is not acting in the public interest because payola, in theory, restricts choice, and there is some theoretical basis for this. (See this site for a discussion of diffusion of innovation theory. Likewise, there is uses and gratifications theory, and some think payola thwarts this.)
That’s what I get for posting after midnight. I hit “submit” when I didn’t mean to.
There are those people who think payola shouldn’t be illegal, and if you accept some of the arguments in this thread, there’s no reason why it should be. A program director I talked to thinks that programming decisions are ultimately his anyway, so if a label wants to sweeten the deal by throwing in some goodies, he’s got no problem with that. But he works for a small station owned by a small company. Other people point to paid commercial time – everyone knows it’s been bought and paid for, so why can’t music be treated the same way.
I have also heard that payola is illegal because it’s always been illegal and the FCC is loath to change things now even though the broadcast model is changing thanks to the Internet, the iPod and satellite radio. Eliott Spitzer’s crusade hasn’t helped much in that regard, since he more or less forced the FCC to take up the issue again.
Unfortunately, I have no cites for a lot of this because it came from private discussions with people who would just as soon remain anonymous.
Robin
Payola leads to crappy music being foisted on the public. I rejoice that it is illegal, and lament the fact that the law is often circumvented.