What’s Wrong With Pay to Play?

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The New York Sun

Even the Lord High Executioner of New York, Eliot Spitzer, seemed in his press release announcing a $10 million settlement with Sony BMG Music Entertainment to feel the need to explain what exactly was wrong with a record company urging radio stations to play its songs. “Aggressive promotion of products is one of the hallmarks of our economy,” Mr. Spitzer acknowledged, in what seemed almost a concession to capitalism.


Alas, it turns out that if you are a record company, it’s illegal under federal law under the Communications Act amendments of 1960. Mr. Spitzer here is stepping on what really is the Federal Communications Commission’s turf, though in this case, as is typical, he stretches to find some New York State law he can claim has been violated.


One can’t fault Mr. Spitzer for enforcing the law, though every prosecutor exercises some discretion in choosing which cases to bring and in allocating his office’s resources. In the case of Mr. Spitzer, he’s been busy chasing disc jockeys from San Diego and Milwaukee, while, as the New York Times recently documented, his office has been asleep at the switch as New York taxpayers are being fleeced for billions of dollars in Medicaid fraud.


But take a step back, and wonder just who these laws are protecting. Back in 1960, or in 1927, when the first federal requirement was imposed on stations to disclose pay-for-play to listeners, it may have made sense; there were only a few radio stations out there. Most cars didn’t even have FM radios. But it’s not 1960 or 1927 anymore. Two satellite radio networks, Sirius and XM, broadcast more than 120 channels each. You can get radio stations over the Internet, or listen to “Podcasts” or iTunes on an iPod. Or download music to your computer directly from a musician’s Web site.


There’s enough competition that it’s hard to fathom the idea that Mr. Spitzer needs to protect consumers or musicians from radio stations who want to sell out to record companies. Consumers are smart enough to turn those stations off, or to change the channel, or, if they like the music, to turn the volume up.


Some radio stations might decide to attract listeners by boasting that their programming decisions are made free of payments by music companies. Others may decide that the record companies are actually pretty good judges of the intersection of artistic merit and popular taste where profits are to be found.


As it is, glossy magazines fly advertisers and potential advertisers to lavish parties. Book publishers pay for good display space at the chain bookstores. Drug companies provide doctors with free samples of new medications. Television stations may choose to run programs produced by their own networks rather than buying ones from outside studios. Other companies entertain clients in luxury boxes at Madison Square Garden or Yankee Stadium. The New York restaurant economy is fueled by expense-account business lunches.


Why there need to be laws, in 2005, to prevent record companies alone from entertaining the radio-station employees that they have business relationships with is a puzzlement to those of us who agree with Mr. Spitzer that “aggressive promotion of products is one of the hallmarks of our economy.” This is one law that a Congress that believes in a free-market economy could do worse than to have a fresh look at, to keep up with the changing technology and to make sure that the music industry isn’t subject to a standard that’s unfairly tough compared to the rest of the American economy.


The New York Sun

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