Monday, July 8, 2013

Pit from Payola

Way back when lil' Mungo was still in diapers, that most munificent body the US Congress held a series of investigations spearheaded by the House Subcommittee on Legislative Oversight into the grievous immorality of "payola", an investigation that nearly derailed the career of the Dickensian vampire most of us know as Dick Clark.

To make sense of this investigation, it helps to know what "payola" is and why it works. Put simply, it's a direct payment from an artist (or an agent thereof, usually) to someone (a radio DJ with a large audience) in exchange for playing their record. That's it. That's what prompted the "greatest deliberative body in the world" to drop its socks and grab its subpoenas. Trading money for airplay.

Now, the Public Choice of this is trivially obvious. Incumbent music industry elites had rents to preserve and this upstart rock and/or roll music threatened these rents. What dost thou when thine rents are besieged? Hie thee to Parliament and beg thy Lord exchequer for relief of course. But this dog won't bark without at least some appeal to popular moral sentiment, says I. The median voter theorem for all its flaws still has teeth in its head. Congress can't just up and flaunt the will of the people and not expect a modicum of comeuppance.

So what misery lurks in payola? Two things I think. Both are predicated on an asymmetry of attention. DJs are specialists in their field. They do the hard, unpleasant work of screening the kelp-festooned, brine-shrimp-encrusted seawater that is musical artistry before it floods your burning ear holes. They have sort of a BATNA disparity, only it's a disparity of knowledge rather than money or political power. Think of it as a drop D tune down of the BATNA disparity enjoyed by university professors: mere specialization gives them dissemination power over the worldview of their audience. The simple act of selecting what material to present gives an edge to which ideas thrive, which wax platters folks think of picking up.

And that points to the other EE violation: uncompensated externalities. The ultimate scarce resource is attention. A catchy earworm consumes a large part of your attention. Don't believe me? You are now silently humming Dexy's Midnight Runner's classic hit "Come on Eileen" and you will be all day unless I let you off the hook. Too-ra-loo-rai-ay.

I think there's something to the claim that DJs are partly reflectors and partly creators of the affections of the audience. They make their bread and butter by catering, which includes giving folks what they want, but also giving them what they didn't know they wanted. And much like the hidden menu at In-N-Out Burger, people may not know what they want until someone shows them. That person is a kingmaker for Animal Style fries.

So, we've got well-entrenched record executives protecting old rents against upstarts and Congress justifying an inquiry into the matter on curious moral grounds. See, someone still has to make programming decisions, and I guess everything else is still under consideration, like retaining a fickle audience and yet more fickle advertisers, but cash payments are out. You can give it away, but you can't sell it. Sex, drugs, and rock-n-roll. How about that.

Okay, okay. Here. I'm not a monster.

Now the only thing you've got left rattling around in your head is an image of a baby Munger crawling around  a Florida bungalow, an oversized safety pin securing a cloth diaper. You're welcome.

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Do you have suggestions on where we could find more examples of this phenomenon?