I think we agree more than your post is letting on. We both agree that disclosure of pay for play would not be a bad thing. After all, this would allow the competitive process to work without any fear of deception. I think you also agree that Spitzer's ban on payola will reduce consumer welfare by lessening competition.

The important policy question becomes whether there is something inherently deceptive about payola that would justify making consumers worse off. I think the answer to that question is no, especially since there is no reason to believe that the mix of songs would change without payola.

I am not sure what the limiting principle is here that would prevent banning other payments based on the same deception argument: slotting fees, payments for inclusion in mutual fund supermarkets, what about the $20 I slip the maitre d to get a nice table to my favorite restaurant?

P.S. Would you trust Whole Foods less if they accepted lower wholesale prices for their products in lieu of a lump sum slotting fee? Anyway, what's this American Idol show you keep talking about?

We do agree on a lot. I am not sure what the limiting principle is, and I need to think about this some more ... perhaps disclosure is the answer in all those cases. I would love to know, for example, if $20 is helpful or required to get a good table.

You may have me on the point about lower wholesale prices. I wonder if they do that.

Other retailers like Wal-Mart and Costco who claim not to take slotting allowances do get special promotional monies from manufacturers, usually in the form of lower wholesale prices. I do not have evidence on Whole Foods specifically, but would be surprised if they did not accept wholesale price reductions to feature products.

I'm not sure if disclosure would be worth the cost of the regulation at the end of the day, but if it is to be done, the key is to do it in a way that respects the role of these payments in the competitive process. Compare recently proposed legislation in California (SB 582) requiring retailers to inform firms of the dollar amounts competitors pay for shelf space -- thereby facilitating collusion. With this type of mindset regarding seemingly unorthodox business practices, I have grave concerns about calling for disclosure.

Interesting conversation, guys. A few thoughts:

I have a hard time taking too seriously the idea that anyone who listens to pop radio strongly believes or relies on the assumption that the songs played are being selected on the basis of some objective standard of artistic merit, whatever that would be. What I assume is that songs are being picked on the basis of whatever the station thinks is likely to appeal to whatever audience is being targeted, which is presumably the same criterion the record companies are using to decide which records to buy airtime for. Radio is a filtering mechanism: out of the thousands of new songs being produced out there, which ones are most likely to appeal to me? I choose a radio station specializing in a type of music that interests me, and record companies try to supply it with songs that they think (hope) I will like enough to buy. They invest a lot of money in making and selling music, so presumably the songs they are willing to spend resources promoting are among the ones most likely to please. If not, they won't be in business too long. Now we have lots of alternative and perhaps better filtering mechanisms, such as iTunes playlists etc, which are also useful because radio is necessarily aimed at mass tastes and therefore will underserve whatever tastes I have that are more esoteric. But radio still provides a valuable forum in which I can hear whatever the industry thinks are its most marketable products.

I find it interesting to think about exactly why increased spins lead to increased sales. The notion that simply by playing something enough you can make people want to buy it doesn't wash with me any more than the manure on the grocery shelf. But it is true that much music (including classical or jazz) takes repeated listening to "grow on" you, and that part of the value of music lies in familiarity and the creation of a shared cultural reference point. If I understand Joshua's argument correctly, part of what he is saying is that, even if you assume a pool of 100 songs of equal artistic merit, more value is created by playing 25 of them four times each than by playing each of them once. This is because people will be much more likely to purchase those 25 songs than they would any of the 100 if all were played, and (I would argue that) this actually reflects an increase in the utility of the music itself, stemming from enhanced familiarity and the shared associations that have formed around it. If the Beatles had never existed, and their entire catalog were suddenly to materialize today, the artist merit of the music would not give it the same value that it has now. Though the artistic purists hate to hear it, marketing *does* create value.

There are exceptions to my view of radio, however. The kind of personal relationship Vic talks about does exist, but only with regard to certain DJs, who cultivate a reputation as having musical knowledge and taste that listeners want to rely on as representing a judgment of quality. Of course, you hardly need laws to prohibit such personalities from accepting payola as their reputations would be destroyed by the revelation that they did.

A question: is payola extant (or as prevalent) in catalog radio formats, i.e, those playing "classic rock" or "oldies?" Is there a market for the creation of "classics" just as there is for the creation of "hits?"

The problem, in my opinion, with payola is that it takes away some of the motivation for the record companies and artists to make good music. They can make bare minimum tracks and as long as they're catchy they can get on the air, as long as the RC is willing to pay.

I'm not sure if it's safe to, "[presume] the songs they are willing to spend resources promoting are among the ones most likely to please," because if these songs are so likely to please, why cheat and guarantee their exposure and likely success?? If Ashlee Simpson hadn't proven to the world how much talent she actually has on SNL, people might believe today that she can sing. People might come to the conclusion that her songs are "among the ones most likely to please" and are better than the rest of what's out there since she's on the radio. We know better though thanks to her live performances. It's that kind of trash that cheapens music. Even people who aren't artistic purists don't like being tricked and lied to. A computer programmer might be able to write a program that allows a machine to reproduce the works of Da Vinci and Michelangelo on canvas but that doesn't mean the works should replace the real thing in museums. Listening to music should be about admiring the skill required to put together something so great. I think that trying to tell people what music on the radio could be like if payola didn't hold it back would be like trying to describe an ocean sunset to a blind man. The people listening may truly love the stuff they're hearing but they don't know any better. Even the best garbage is still trash.

One thing I'm really curious about is how much music gets on the air without payola. That'd be really interesting to see. Finding out that J-Lo's hits were paid for is no surprise. I'd be interested in finding out which ones just made it.

The problem, in my opinion, with payola is that it takes away some of the motivation for the record companies and artists to make good music. They can make bare minimum tracks and as long as they're catchy they can get on the air, as long as the RC is willing to pay.

I'm not sure if it's safe to, "[presume] the songs they are willing to spend resources promoting are among the ones most likely to please," because if these songs are so likely to please, why cheat and guarantee their exposure and likely success?? If Ashlee Simpson hadn't proven to the world how much talent she actually has on SNL, people might believe today that she can sing. People might come to the conclusion that her songs are "among the ones most likely to please" and are better than the rest of what's out there since she's on the radio. We know better though thanks to her live performances. It's that kind of trash that cheapens music. Even people who aren't artistic purists don't like being tricked and lied to. A computer programmer might be able to write a program that allows a machine to reproduce the works of Da Vinci and Michelangelo on canvas but that doesn't mean the works should replace the real thing in museums. Listening to music should be about admiring the skill required to put together something so great. I think that trying to tell people what music on the radio could be like if payola didn't hold it back would be like trying to describe an ocean sunset to a blind man. The people listening may truly love the stuff they're hearing but they don't know any better. Even the best garbage is still trash.

One thing I'm really curious about is how much music gets on the air without payola. That'd be really interesting to see. Finding out that J-Lo's hits were paid for is no surprise. I'd be interested in finding out which ones just made it.