TCSDaily asks: "After nearly five decades of futility, will Congress concede that a market will—and ought to—continue to exist for radio airtime, as it does for many analogous resources?"

The point is that radio exposure is a scarce and valuable resource, and if people cannot acquire it by open market transactions then they will acquire it by murkier methods. Furthermore, these substitutes are not efficient. Advertising theory is quite contrary to the "brainwashing" views that characterizes most inane commentary; on the whole, a hit cannot be manufactured -- the dogs must like the dog food -- so a heavy advertising budget is a good use of money only to bring to people's attention something they will like once they learn about it. A heavy ad budget is a good signal that the producer honestly believes in the product.

Allowing payment for exposure is also pro-competitive, because it allows new entrants to use money as a substitute for an established structure of relationships. Outlawing promotional payments actually helps incumbents.

Putting on my old FTC consumer protection hat, the only real problem with promotional payments is when the consumer is misled -- he/she thinks that the DJ is combing the new releases to find the best music, when actually the DJ is being paid off. This is cured by disclosure. Of course, sometimes the payola is designed explicitly to play on this misapprehension, and then it deserves no protection, but if the DJ says "they paid me a bundle to play this dog food because they think you'll gobble it up and come back for more" -- no problem.

A final issue is the changing nature of radiio. As satellite and HD radio increase the number of channels and fragment the revenues from advertising, it would make sense for broadcasters to integrate backwards into the development and marketing of talent. "XM presents its latest musical finds . . . " This would open up new sources of revenue for artists and competition among talent scouts and backers, but it cannot happen if XM is not allowed to plug its own dog food.

Once the reality of links between playlists and interest became a matter of general knowledge, even the disclosures could be dispensed with. And disinterested DJs could advertise their independence.

The author of the article, Martin Friedson, has authored a book on Unwarranted Intrusions: The Case Against Government Intervention in the Marketplace. It must be a long one.

He is not optomistic that the situation will change, though: "From a political viewpoint, however, legalization would eliminate politicians' regularly recurring opportunity to grab headlines with investigations of a glamorous business."

posted by James DeLong @ 8:35 AM | Radio

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