Eliot Spitzer, your state attorney general of New York, went after Sony for allegedly paying radio stations, and radio station personnel, for air-time for their music. Sony has now settled. Evidently this was taboo in the radio industry thirty years ago, but it is not surprising to me that money was exchanging hands. Sony wants air time, which is scarce, radio stations have air time, which is scarce, and it is hardly surprising that mutually beneficial trade would take place.

Evidently, taking such "payola" is against state and federal law. This seems odd, seeing as how Coca Cola pays television and radios for precious advertising time. If listening to the radio is a form of sampling, then paying to have a song played seems no different than advertising. I suppose there is the appearance of impropriety because the payola isn't announced or widely recognized as implicit, as in the case of regular advertising.

However, the attorney general of New York goes a little further and suggests that consumers interpret a song played on a radio as a signal of quality, rather than listening to a song and deciding on their own if it is a quality piece of music or not. This sounds like the Kaldor argument against advertising: advertising alters tastes and preferences rather than the Becker/Stigler argument presented in "De Gustibus."

It seems rather simple for most music listeners to decide on their own if they like Cold Play, Jessica Simpson, or Nat King Cole. But Spitzer's office claims that, to some, playing a song on the radio signals that it has some artistic value. This seems to be a rather condescending view of the consuming public (I might excuse the youngsters who might not know better, yet).

"Our investigation shows that, contrary to listener expectations that songs are selected for airplay based on artistic merit and popularity, air time is often determined by undisclosed payoffs to radio stations and their employees," Spitzer said.

So where is the inefficiency? Where is the economic damage? Some claim that the payola keeps a good, local/smaller bands off the radio, but this has never set well with me. The claim is that small labels and smaller bands do not have the resources to buy their way onto the radio. However, why would Sony spend their money on artists that are of lower quality than others? If Sony has the choice of signing a low-quality artist and having to pay to get their music played versus signing a high-quality artist and not having to pay to get their music played, the problem seems trivial. When you add the complications of multi-media crossovers and marketing, such as is the case with Jessica Simpson, then the music might just be a loss-leader. Sony ignores the high-quality, non-sexy, performer for the sexy, low-quality performer.

I quit listening to FM radio years ago because during my ten minute commute I could never find any music - just ads and dj's yapping. Hence, switch to AM and catch some Joe Q. Public or hit the MP3 disk in the deck. The future of broadcast music radio is probably irrevocably damaged by satellite and MP3 services. Thus, instead of banning what is a natural market, why not just require full information /disclosure?

If everyone knows that the music they hear on the radio is paid for, they can take it or leave it, just as they do with paid advertising in the rest of the matrix.

Is the payola illegal? perhaps. Is it immoral? That is less clear.

Drudge now links to a couple of additional stories: here and here .