Payola Scandals Show Why Performance Rights Tax Makes No Sense

from the reverse-economics dept

We've pointed out in the past what a ridiculous contradiction it is that Rep. John Conyers has both fought against "payola" and argued for a performance rights tax on radio at the same time (even going so far as to make the argument that a lack of such a tax was the equivalent of slavery). This, of course, makes no sense. Basically, when left to the actual market, the RIAA implicitly admits that it's quite valuable for musicians to get on the radio: that's why it pays radio stations so often. The whole point of the Performance Rights tax is to force the economic equation in the opposite direction. The RIAA (and SoundExchange) insist the Performance Rights Tax is necessary because radio doesn't have the same promotional value it once had -- but if that's the case, why do labels keep on paying money under the table for payola deals?

Apparently yet another payola case was just settled, leading Ars Technica to not only point out that this undermines the RIAA's entire basis for the Performance Rights tax, but to highlight the payola deals that have come to light over the past few years:
Sony was busted (and paid out much more) for even more egregious violations back in 2005. Sony's promoters went so far as to tell radio stations that the "real people" (they were planted) calling in to request songs had to be more convincing.

"As for Saturday nights, you need to rotate your people," said one message from a promoter. "My guys on the inside say that it's the same couple of girls calling in every week and that they are not inspired enough to be put on the air. They've got to be excited. They need to be going out, getting drunk, or going in the hot tube [sic], or going clubbing... you get the idea."

Later that year, fellow major label Warner Music paid out $5 million to make its own payola problems go away.

In 2006, the world's largest music label, Universal, paid $12 million for a long history of payola. As the New York Times noted, the payola could take many forms, including trips and baseball tickets.

"In April 2004, Universal provided Mr. Michaels--by then a programmer at WHYI-FM in Miami--with a New York hotel room and New York Yankees tickets. The company booked the room under a false name and used a false Social Security number to conceal the transaction, the document states."

Finally, in mid-2006, the last major label, EMI, settled its own payola charges by paying $3.75 million in fines.

In 2007, the broadcasters were busted. CBS, Citadel, Clear Channel, and others paid more than $12 million and signed similar anti-payola consent decrees.
It's hard to believe that anyone takes the RIAA seriously when it claims that radio stations don't provide much promotional value to artists when at the same time the RIAA labels keep funneling cash to radio stations under the table to get them to play their music. Pretending that it's somehow not just fair, but "morally" correct, to force radio stations to pay for the right to promote the RIAA's music, is really impressive from a "that takes guts" standpoint. But it's difficult to believe that anyone who isn't receiving a paycheck from the RIAA can actually support that position with a straight face.


Reader Comments (rss)

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  •  
    identicon
    wallow-T, Aug 10th, 2010 @ 2:38pm

    It's subtle and slippery. Payola is all about getting exposure for new music, and so the value is provided FROM the radio station TO the label/musician. Thus "payola," which in other fields would be called "product placement."

    For old music, on the other hand, the value probably flows the other way. The Beatles and Led Zeppelin don't gain much exposure when their ancient songs are played, but the radio station gets listeners who are drawn to the audio comfort food. No record company spends payola money on 20-40 year old classic hits.

    At some deep level, so much of this, over the last century, has been trying to create a market out of intangibles.

     

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    •  
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      jjmsan (profile), Aug 10th, 2010 @ 2:46pm

      Re:

      So no young people purchase Beatles or Led Zeppelin records?

       

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        Jay (profile), Aug 10th, 2010 @ 2:51pm

        Re: Re:

        They're all listening to Elvis. You know he's still making millions.

         

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        Danny, Aug 11th, 2010 @ 8:23am

        Re: Re:

        That's not to say that today's youth aren't buying their music but to say that they are not as much of a draw as they were in the past. Old music is great but with the way the record companies have the music industry set up now (or more precisely the tastes of most of today's music fans) they have to always have "the next big thing" coming down the pike.

        A lot of this nonsense over performance rights and payola and all that isn't for old classics its for maximizing exposure for the latest hot thing. Not so much Beatles and Pink Floyd but rather Lady GaGa and Justin Beiber.

         

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      PaulT (profile), Aug 10th, 2010 @ 3:10pm

      Re:

      "Payola is all about getting exposure for new music, and so the value is provided FROM the radio station TO the label/musician."

      But, the implicit inference is that the music itself would not get played unless payola is in place. Without payola, the DJs at the stations would play what they think is good, or what their audience are *actually* demanding - which can also be new music if it's good enough (and to be honest probably will be).

      "Thus "payola," which in other fields would be called "product placement.""

      The problem is that in other industries, there's a separation between the product and the placement. That is, there's a definite difference between the experience of seeing a bottle of Coke and drinking an actual bottle. With radio, the song is both the product *and* the advertisement.

      That's what makes this so ridiculous - they're suing when they don't force people to play what they want, while paying to force other parts of the market. This is the problem - instead of moulding their product to what people want, they try to force peoples' tastes to match what they want to sell. If they have quality product, it acts as its own advertisement.

      "The Beatles and Led Zeppelin don't gain much exposure when their ancient songs are played"

      I disagree. It depends on the venue, of course. A station catering to people who remember the 60s and 70s? Not so much - they've already heard the music ad nauseum and probably own all the albums several times over.

      But teenagers with little experience of their music beyond a few overplayed singles? Exposure can still be valuable. You only have to look at the resurgence of interest in The Beatles after their Rock Band game to see that. You forget that albums 20-40 years old have a brand new audience created in that time who may never have heard them.

      I remember listening to a lot of Hendrix and Doors when I was a teenager. I wouldn't be born for several years when Jimi and Jim died. Most people I meet like listening to Bob Marley, even if they weren't born when he died, and so on...

       

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        Christopher Bingham (profile), Aug 11th, 2010 @ 10:29am

        Re: Re:

        Without payola, the DJs at the stations would play what they think is good, or what their audience are *actually* demanding - which can also be new music if it's good enough (and to be honest probably will be).

        The DJs don't make those decisions. The Music Director and the Program Director decide. So the MDs might do that and sometimes actually do. The only place DJs have any say is on specialty programs which usually happen on the Sunday morning folk ghetto.

        New music is added on Tuesdays and commercial stations add three new tunes a week. If they get serious response, and the records are selling, they end up in rotation. The labels pay to get them on the air and keep them there long enough to gauge the response, but that's about all they can do. The radio stations ride the line between the "comfort food" (wonderful metaphor!) of proved hits and enough new stuff to keep the playlist relevant.

        All of this is happening in the context of mass market surveys. You get a call from a radio marketer and he plays you six seconds of a song. You rate it 1-5 and they throw out the ones and the fives, knowing that if people really like a tune, a significant proportion of the audience will also hate it. Programming for mediocrity.

        The entire purpose of the music on radio stations is to get you to listen through the advertisements.

         

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      identicon
      Anonymous Coward, Aug 11th, 2010 @ 6:30am

      Re:

      For old music, on the other hand, the value probably flows the other way.

      Except that playing the stuff people WANT to hear draws the audience that makes Payola worth it. Which is to say, playing the old stuff builds the value that payola's paying for; without that, the system falls apart.

       

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  • This comment has been flagged by the community. Click here to show it
     
    identicon
    Anonymous Coward, Aug 10th, 2010 @ 3:53pm

    Funny commercial (arranged marriage) showing common American stereotypes that reached India.
    http://www.youtube.com/watch?v=b5HLsvwLPpQ

    I think the industry wants to kill all those stereotypes that helped them become what they become.

    I don't think it is bad, I hope they die.

    Talking about India the prime minister or something was talking about "soft power" the power of culture invading other countries and how that helps on a TED event.

    Looking on how things are going, the U.S. looks like medieval Japan that didn't want anybody or anything from the outside, that ended well.

     

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    identicon
    A. Coward, Aug 10th, 2010 @ 4:13pm

    I would like to see...

    If they could leave the market open and let the record labels make direct agreements with broadcasters and webcasters.... I bet if the RIAA members started charging radio stations while Indie Labels didn't we would have a lot more GOOD music on the radio instead of the forced 'hits' we hear now.

    Let's see who needs who!

    I am also sure that if music was forced off the radio we would have something else to listen to, radio novels, news, sport games, infomercials (they do have a market), and maybe we could even innovate. It would take some time for the adjustment, but I am sure that the radio and streams would still exist, while the artists would have to look for new avenues to get promoted, and probably ditch the RIAA Labels altogether.

     

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      identicon
      Danny, Aug 11th, 2010 @ 8:29am

      Re: I would like to see...

      "I am also sure that if music was forced off the radio we would have something else to listen to, radio novels, news, sport games, infomercials (they do have a market), and maybe we could even innovate. It would take some time for the adjustment, but I am sure that the radio and streams would still exist, while the artists would have to look for new avenues to get promoted, and probably ditch the RIAA Labels altogether."

      And that is what RIAA fears. They are self imposed middlemen that have gotten away with their money grubbing tactics for years. Thing is the technology to distribute music has changed drastically to the point where if you almost need only a computer and the internet to get your music and you name out there. And the record companies know this.

      For the most part they have outlived their usefulness and are now just trying to do anything they can to "prove" (or more like force) the music industry to accomodate their existence.

       

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    identicon
    Anonymous Howard, Aug 10th, 2010 @ 6:48pm

    Payola should be dealt with more severely (since the airwaves are public property it is akin to treason). Any company engaging in it ought to be literally fined out of existence (all capital auctioned off and all assets seized), and all employees and associates of the company permanently banned from any business associated with music in any way. The death penalty should be considered for severe cases.

     

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      nasch (profile), Aug 11th, 2010 @ 1:11pm

      Re:

      I was thinking allow it, unlimited - but with full disclosure laws, so if you care you can find out how much payola there is at your favorite station, and for what songs. If people want to listen to stuff the labels pay to put on the air, let em. If other stations don't take payola and play what they want, and nobody listens to them, then I guess we can see what the people want.

      The only problem I see is that the payola stations could afford great big towers and powerful transmitters while the others couldn't.

       

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    identicon
    Anonymous Coward, Aug 10th, 2010 @ 11:53pm

    wont somebody think about the children?

     

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    Ben (profile), Sep 9th, 2010 @ 10:00am

    Performance Rights Royalties for Sound Recordings Are FUNDAMENTALLY Correct

    Mike,

    While I agree that major labels' payola undermines their argument, they're ultimately on the right side when it comes to performance rights royalties for sound recordings. Together, the U.S. -- along with China, Rwanda, North Korea, and Iran -- are the only countries that don't pay rights holders of sound recordings for the performance of their works (in the non-digital realm). You could say that major labels (and their marquee artists) don't need the income because they'll obtain it from a bevy of other avenues that radio promotion would drive, but what about small-to-mid level artists? We're moving to a world where the performance of music is the endgame -- not it's purchase -- which only becomes more apparent with increases in online streaming and on-demand plays. When Spotify hits next year (or whenever it's slated to launch), this will only become clearer. iTunes sales have already begun to taper off, and CD sales have plummeted 58% in ten years. More artists are getting the chance to have their music heard than ever before, but the traditional means of compensation (sales of music) are not enough to compensate. Giving artists (of all levels) compensation for the performance of their sound recordings is simply a right that they deserve. Don't let the track record of the RIAA and the major labels jade your viewpoint of what is fundamentally a just cause.

    Ben Sheehan

     

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    identicon
    hue, Oct 15th, 2011 @ 1:10pm

    "why do labels keep on paying money under the table for payola deals?"
    There could be a explanation to this, the idea is to remove other artists from market, to talk about them like if they never existed or never talk about them.
    Thats why internet still doenst work for advertisment, people dont know that there is such artists out there and doenst search for them. They saw those 3 songs per year their entire lifetime and think that is the way it happens, in fact they doenst even think about it.

    Imagine you have a metal detector in your house and you live near a cave with treasures on it. If you dont know that there are treasures there you will not use your metal detector to find it.
    Another analogy, is, you need to know there is a curtain to be able to try to search what is hidden in the curtains.
    Even ETs there are some people that actually try to search to see if they find it, but this usually doenst happens with music. People usually only stumble upon some musical thing on net by pure luck and them (sometimes) decide to search about it.

    Payola is more about "here is what exist, pick what you want to listen, if you want to listen to something" and not about "I will play it and you will like it"

     

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