Payola is Dying

If you’ve ready any of the articles / information on this site, you know that we’ve always seen payola as a lynchpin of major label dominance. The 4 major labels have, for decades, been paying hundreds of thousands of dollars to “independent promoters” who in turn pay radio stations to play certain songs. It’s a system that virtually guarantees that musicians who don’t have serious money behind their music will never get onto commercial radio.

Now– almost magically– NY State Attorney General Eliot Spitzer has come along and saved the day. As we mentioned in the fall, he’s launched an investigation into the practice of payola. And people know that when he goes after something, he’s serious. Salon now has a must-read article which reports that the major labels are cutting off the payola spigot in an attempt to avoid a scandal as Spitzer starts digging in. That’s right, for now at least, payola is stopping. It’s incredible news and a huge victory for the public interest and for music. Thank you, Mr. Spitzer.

Salon has this great quote from an anonymous record exec: “Spitzer says I’m going to look into this and everybody’s folding like a house of cards… We needed an outsider to come in and say this is bullshit and this is illegal.” Pretty amazing.

But there are many caveats here. The most astute insight in the Salon piece is that many of the more adventurous music fans are already ditching mainstream radio: they’re moving to satellite, web radio, and ipods. This brain drain gives stations even less incentive to offer diverse musical options. So even without payola, the argument goes, radio will continue it’s monotonous course. Probably true for the most part.

The Salon article also points out that there are a few bigger indy labels that could afford to pay independent promoters under the current system and it helped them break new acts. If that system disappears, radio stations might become even more conservative about picking established hits. This is definitely a real possibility. But given the virtual absence of independent music on commercial radio to begin with, it’s a relatively small loss that accompanies the potential for enormous gains.

And the opportunity is huge: There’s the obvious positive that independent music won’t be at a direct financial disadvantage trying to get on the air– if station programmers think a song could be a hit, they’ll try it. But this leads back to the caveat above, that without guidance from payola, stations might become even more risk averse and stick with major label fare. But even if that happens in some cases, I expect that the results will be much more varied and exciting. Because with payola gone, radio stations will have lost one of the big signaling mechanisms they use to decide how big a hit the major labels expect an album to be– that means a lot of stations will have to start thinking for themselves. They’ll have to do more research and reading and thinking to try to find new hits, instead of just letting the money write the playlist for them. They’ll be more responsive to requests, more interested in reviews, and they’ll pay a lot more attention to independent music that’s getting online buzz. That’s a very good thing for everyone.

Ultimately, regular (terrestrial) commercial radio seems to be in inevitable decline, as we’ve discussed before (again, it’s ipods, satellite, web radio). But for the time being, it’s still the crucial marketing mechanism for the major labels. And anything that weakens their grip on radio weakens their business and lowers their chances of being able to maintain their monopoly during the leap to digital music that’s happening right now. The end of payola is awesome (let’s hope it lasts…).